EXHIBIT g.2
FORM OF
CUSTODIAN AGREEMENT
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FORM OF
CUSTODIAN AGREEMENT
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THIS AGREEMENT, dated as of ______________ __, 2001, between AETNA SERIES
FUND, INC. - AETNA INTERNATIONAL FUND, an open-end management investment company
organized under the laws of the State of Maryland and registered with the
Commission under the 1940 Act (the FUND), and XXXXX BROTHERS XXXXXXXX & CO., a
limited partnership formed under the laws of the State of New York (BBH&Co. or
the CUSTODIAN),
W I T N E S S E T H:
WHEREAS, the Fund wishes to employ BBH&Co. to act as a 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 a custodian
for the Fund, and BBH&Co. hereby accepts such appointment. All Investments,
cash and cash equivalents 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.
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2.2 By providing an Instruction with respect to the first
acquisition of an Investment in a jurisdiction other than the United
States of America, the Fund shall be deemed to have confirmed to the
Custodian that the Fund has (a) assessed and accepted all material
Country or Sovereign Risks and accepted responsibility for their
occurrence, (b) made all determinations required to be made by the
Fund under the 1940 Act, and (iii) appropriately and adequately
disclosed to its shareholders, other investors and all persons who
have rights in or to such Investments, all material investment risks,
including those relating to the custody and settlement infrastructure
or the servicing of securities in such jurisdiction.
2.3 The Fund shall safeguard and shall solely be responsible for
the safekeeping of any testkeys, identification codes, passwords,
other security devices or statements of account with which the
Custodian provides it. In furtherance and not limitation of the
foregoing, in the event the Fund utilizes any on-line service offered
by the Custodian, the Fund and the Custodian shall be fully
responsible for the security of their respective connecting terminal,
access thereto and the proper and authorized use thereof and the
initiation and application of continuing effective safeguards in
respect thereof. Additionally, if the Fund uses any on-line or similar
communications service made available by the Custodian, the Fund shall
be solely responsible for ensuring the security of its access to the
service and for the use of the service, and shall only attempt to
access and use the service and the Custodian's computer systems as
directed by the Custodian. If the Custodian provides any computer
software to the Fund relating to the services described in this
Agreement, the Fund will only use the software for the purposes for
which the Custodian provided the software to the Fund, and will abide
by the license agreement accompanying the software and any other
security policies which the Custodian provides to the Fund.
3. REPRESENTATION AND WARRANTY OF BBH&Co. BBH&Co. hereby represents and
warrants that this Agreement has been duly authorized, executed and delivered by
BBH&Co. 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.
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, AUTHORIZED PERSONS shall
be any 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 for the
Fund, provided, however, that no such Instructions directing the delivery
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of securities or the payment of funds to an authorized signatory of the Fund
shall be signed by such person. Authorized Persons may also include persons
authorized by the Board of Trustees or Directors of the Fund. 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 identified by the Fund or by an Authorized Person entitled to
give Instruction and acknowledged and accepted by the Custodian; it
being understood that such acknowledgment shall authorize the
Custodian to receive and process such means of delivery but shall not
represent a judgment by the Custodian as to the reasonableness or
security of the method determined by the Authorized Person.
4.2.2 WRITTEN INSTRUCTIONS. Instructions may be transmitted in a
writing that bears the manual signature of Authorized Persons.
4.2.3 OTHER FORMS OF INSTRUCTION. Instructions may also be
transmitted by another means determined by the Fund or Authorized
Persons and acknowledged and accepted by the Custodian (subject to the
same limits as to acknowledgements as is contained in Subsection
4.2.1, above) including Instructions given orally or by SWIFT, telex
or telefax (whether tested or untested).
When an Instruction is given by means established under Subsections 4.2.1
through 4.2.3, it shall be the responsibility of the Custodian to use reasonable
care to adhere to any security or other procedures established in writing
between the Custodian and the Authorized Person with respect to such means of
Instruction, but such Authorized Person shall be solely responsible for
determining that the particular means chosen is reasonable under the
circumstances. Upon receipt of oral Instructions, the Custodian will call the
Fund at its last known telephone number, request to speak to an Authorized
Person, and confirm the authorization and the details of the oral instruction (a
"Callback"). Once confirmed by Callback, the Custodian shall use reasonable care
in carrying our such oral instruction. With respect to telefax Instructions, the
parties agree and acknowledge that receipt of legible Instructions cannot be
assured, that the Custodian
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cannot verify that the signatures of Authorized Persons reflected on telefax
Instructions are original or properly affixed; therefore, provided that the
Custodian has exercised reasonable care and such Instructions otherwise comply
with the terms of this Agreement, the Custodian shall not be liable for losses
or expenses incurred through actions taken in reliance on telefax Instructions
which the Custodian identifies as bearing the signature of an Authorized Person
even if that signature is not original. In the event of the receipt of an
illegible or unclear telefax instruction, the Custodian will promptly contact
the Fund for clarification. The provisions of Section 4A of the Uniform
Commercial Code shall apply to Funds Transfers performed in accordance with
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;
4.3.3 A description of the Investments or moneys in question,
including, as appropriate, quantity, price per unit, amount of money
to be received or delivered, currency information and any identifying
number. Provided that the Custodian shall use reasonable care, the
Custodian shall be entitled to rely on such description contained
within an Instruction; and
4.3.4 The name of the broker or similar entity concerned with
execution of the transaction. If the Custodian shall reasonably 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
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4.4 TIMELINESS OF INSTRUCTIONS. In giving an Instruction, the Fund
shall take into 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 an account held for the Fund or in an
account maintained by the Subcustodian generally for non-proprietary assets of
the Custodian.
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
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may be, and (b) in an account for the Fund or in bulk segregation in an account
maintained for the non-proprietary assets of the entity holding such Investments
in the Depository. If market practice or the rules and regulations of the
Securities Depository prevent the Custodian, the Subcustodian or (any agent of
either) from holding its client assets in such a separate account, the
Custodian, the Subcustodian or other agent shall as appropriate segregate such
Investments for benefit of the Fund or for benefit of clients of the Custodian
generally on its own books.
5.2 CERTIFICATED ASSETS. Investments which are certificated may be
held in registered or bearer form: (a) in the Custodian's vault; (b) in the
vault of a Subcustodian or agent of the Custodian or a Subcustodian; or (c) in
an account maintained by the Custodian, Subcustodian or agent at a Securities
Depository; all in accordance with customary market practice in the jurisdiction
in which any Investments are held.
5.3 REGISTERED ASSETS. Investments which are registered may be
registered in the name of the Custodian, a Subcustodian, or in the name of the
Fund or a nominee for any of the foregoing, and may be held in any manner set
forth in 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 be so held in an account maintained by the Book-Entry Agent on behalf of the
Custodian, a Subcustodian or another agent of the Custodian, or a Securities
Depository.
5.5 REPLACEMENT OF LOST INVESTMENTS. In the event of a loss of
Investments for which the Custodian is responsible under the terms of this
Agreement, the Custodian shall promptly (a) report such loss to the Fund and
(b)(i) replace such Investment or (ii) in the event that such replacement cannot
be effected, the Custodian shall pay to the Fund an amount equal to the value
the Fund would assign such investment in determining the Fund's net asset value
on the date of such payment.
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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 representing such Investment.
6.2 SALE OF INVESTMENTS. Pursuant to Instruction, Investments sold for
the account of the Fund shall be delivered (a) against payment therefor in cash,
by check or by bank wire transfer, (b) by credit to the account of the Custodian
or the applicable Subcustodian, as the case may be, with a Clearing Corporation
or a Securities Depository (in accordance with the rules of such Securities
Depository or such Clearing Corporation), or (c) otherwise in accordance with an
Instruction, Applicable Law, generally accepted trade practices, or the terms of
the instrument representing such Investment.
6.3 DELIVERY 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 initial, maintenance or
variation "margin" deposits or other collateral intended to secure the Fund's
performance of its obligations under the terms of any exchange-traded futures
contracts and commodity options; and (c) thereafter pay, release or transfer
Investments into or out of the margin account in accordance with the provisions
of such Agreement. Alternatively, the Custodian may deliver Investments, in
accordance with an Instruction, to a futures commission merchant for purposes of
margin requirements in accordance with Rule 17f-6. The Custodian shall in no
event be responsible for the acts and omissions of any futures commission
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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
except as set forth in this Section 6.4.
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. The Custodian shall have no responsibility for agreements running
to the Fund as to which it is not a party other than to retain, to the extent
the same are provided to the Custodian, documents or copies of documents
evidencing the arrangement and, in accordance with Instruction, to include such
arrangements in reports made to the Fund.
6.6 EXCHANGE OF SECURITIES. Unless otherwise directed by Instruction,
the Custodian shall: (a) exchange securities held for the account of the Fund
for other securities in connection with any reorganization, recapitalization,
conversion, split-up, change of par value of shares or similar event, and (b)
deposit any such securities in accordance with the terms of any reorganization
or protective plan.
6.7 SURRENDER OF SECURITIES. Unless otherwise directed by Instruction,
the Custodian may surrender securities: (a) in temporary form for definitive
securities; (b) for transfer into a name or moninee name as permitted 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 (b) collect all stock dividends,
rights and other items of like nature with respect to such securities.
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6.10 INCOME COLLECTION. Unless otherwise directed by Instruction, the
Custodian shall collect and receive 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
the extent an Investment is in default, or (b) the collection of cash or share
entitlements with respect to Investments that have not been delivered to 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 promptly deliver, or
promptly cause to be delivered, to the Fund's designated proxy agent 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. In the performance of its duties with respect to tax withholding and
reclamation, the Custodian shall be entitled to rely on the advice of counsel
and upon information and advice regarding the Fund's tax status that is received
from or on behalf of the Fund without duty of separate inquiry.
6.14 OTHER DEALINGS. The Custodian shall use reasonable care and
otherwise act as directed by Instruction, including without limitation effecting
the free payments of moneys or the free delivery of securities, provided that
such Instruction shall indicate the purpose of such payment or delivery and that
the Custodian shall record the party to whom such payment or delivery is made.
The Custodian shall attend to all nondiscretionary details in
connection with the sale or purchase or other administration of Investments,
except as otherwise directed by an Instruction, and may make payments to itself
or others for minor expenses of administering Investments under this Agreement;
provided that all such payments shall be accounted for to the Fund.
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In fulfilling the duties set forth in Sections 6.6 through 6.10 above,
the Custodian shall promptly 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
any obligation under this Agreement and the Custodian shall be responsible for
the Agent's actions or failures to act to the same extent as if they were the
Custodian's own.
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 collectively shall be a deposit obligation of the Custodian and shall
be subject to the terms of this Section 7 and the general liability provisions
contained in Section 9. Cash accounts opened on the books of a Subcustodian may
be opened in the name of the Fund or the Custodian or in the name of the
Custodian for its customers generally (AGENCY ACCOUNTS). Such deposits shall be
obligations of the Subcustodian and shall be treated as an Investment of the
Fund. Accordingly, the Custodian shall be responsible for exercising reasonable
care in the administration of such accounts but shall not be liable for their
repayment in the event such Subcustodian, by reason of its bankruptcy,
insolvency or otherwise, fails to make repayment.
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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, provided that the
Custodian shall give the Fund notice of its intent to reverse such payment 24
hours in advance of such reversal.
7.3 CURRENCY AND RELATED RISKS. The Fund bears risks of holding or
transacting in any currency. The Custodian shall not be liable for any loss or
damage arising from the applicability of any law or regulation now or hereafter
in effect, or from the occurrence of any event, to the extent such law,
regulation or event delays or otherwise adversely affects 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 to the extent its
transferability, convertibility or availability has been restricted 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
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the Fund except to the extent such taxes, costs, changes or fees result from the
failure of the Custodian or Subcustodian to fulfill its obligations under this
Agreement.
7.4 FOREIGN EXCHANGE TRANSACTIONS. The Custodian shall, subject to
the terms of this Section, settle foreign exchange transactions (including
contracts, futures, options and options on futures) on behalf and for the
account of the Fund with such currency brokers or banking institutions,
including Subcustodians, as the Fund may direct pursuant to Instructions. The
Custodian may act as principal in any foreign exchange transaction with the Fund
in accordance with Section 7.4.2 of this Agreement. The obligations of the
Custodian in respect of all foreign exchange transactions (whether or not the
Custodian shall act as principal in such transaction) shall be contingent on the
free, unencumbered transferability of the currency transacted on the actual
settlement date of the transaction.
7.4.1 THIRD PARTY FOREIGN EXCHANGE TRANSACTIONS. The Custodian
shall process foreign exchange transactions (including without
limitation contracts, futures, options, and options on futures), where
any third party acts as principal counterparty to the Fund on the same
basis it performs duties as agent for the Fund with respect to any
other of the 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 Dollars or foreign currency without receiving confirmation of
a foreign exchange contract or option or confirmation that the
countervalue currency completing the foreign exchange contract has
been delivered or received or that the option has been delivered or
received, and (c) shall hold all confirmations, certificates and other
documents and agreements received by the Custodian and evidencing or
relating to such foreign exchange transactions in safekeeping. The
Fund accepts full responsibility for its use of third-party foreign
exchange dealers and for execution of said foreign exchange contracts
and options and understands that the Fund shall be responsible for any
and all costs and interest charges which may be incurred by the Fund
or the Custodian as a result of the failure or delay of third parties
to deliver foreign exchange, provided the Custodian has acted in
accordance with Instructions and the relevant standard of care under
this Agreement.
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.
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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. The
Custodian and its Subcustodian shall not be liable for delays in carrying out
such Instructions to transfer cash which are not due to the Custodian's or the
Subcustodian'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 all Investments
(other than Investments pledged by the Fund); and,
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
13
made by a Subcustodian or any other person, the Custodian may assign the
security interest and any other rights granted to the Custodian hereunder to
such Subcustodian or other person. If the Fund shall fail to repay when due the
principal balance of an Advance and accrued and unpaid interest thereon, the
Custodian or its assignee, as the case may be, shall be entitled to the extent
necessary to recover payment of all principal of, and interest on, such Advance
in full, to utilize the cash balance in an Agency or Principal Account and to
request that the Fund's Investment Adviser immediately select and list for the
Custodian liquid and readily marketable Investments, all or any of which
Investments the Custodian shall have the right to sell, assign or deliver at a
private or public sale. The Fund hereby directs its Investment Adviser upon
request from the Custodian to immediately select and list for the Custodian
liquid and readily marketable Investments to be sold in order to pay amounts
owed by the Fund in connection with Advances. The Custodian shall give the Fund
prompt subsequent notice of any charge against a cash balance hereunder. The
Custodian may assign any rights it has hereunder to a Subcustodian or third
party. Any security interest in Investments taken hereunder shall be treated as
financial assets credited to securities accounts under Articles 8 and 9 of the
Uniform Commercial Code (1997). Accordingly, the Custodian shall have the rights
and benefits of a secured creditor that is a securities intermediary under such
Articles 8 and 9.
7.7 INTEGRATED ACCOUNT. For purposes hereof, deposits maintained in
all Principal Accounts (whether or not denominated in 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.
14
8. SUBCUSTODIANS AND SECURITIES DEPOSITORIES. 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 United States, including The Depository Trust Company, provided such
Depository meets applicable requirements of the Federal Reserve Bank or of the
Securities and Exchange Commission. The Custodian may, at any time and from time
to time, appoint any bank as defined in Section 2(a)(5) of the 1940 Act meeting
the requirements of a custodian under Section 17(f) of the 1940 Act and the
rules and regulations thereunder, to act on behalf of the Fund as a Subcustodian
for purposes of holding Investments of the Fund in the United States.
8.2 FOREIGN SUBCUSTODIANS AND SECURITIES DEPOSITORIES. 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
15
risks on a continuing basis in accordance with subsection 8.2.3 of this Section.
Additionally, the Custodian may, at any time and from time to time, appoint (a)
any bank, trust company or other entity meeting the requirements of an "eligible
foreign custodian" under Rule 17f-5 or which by order of the Securities and
Exchange Commission is exempted therefrom, or (b) any bank as defined in Section
2(a)(5) of the 1940 Act meeting the requirements of a custodian under Section
17(f) of the 1940 Act and the rules and regulations thereunder, to act on behalf
of the Fund as a Subcustodian for purposes of holding Investments 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. The
Custodian's duties and obligations with respect to review of
Subcustodians and of subcustodian contracts 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
as contemplated by Rule 17f-7; and (b) shall have established a system
to monitor the custody risks associated with maintaining assets with
such Securities Depository on a continuing basis and to promptly
notify the Fund or its Investment Adviser of any material changes in
such risk or the qualification of such Securities Depository as an
Eligible Foreign Securities Depository under Rule 17f-7 in accordance
with the foregoing standard. In performing its duties under this
subsection, the Custodian shall exercise reasonable care and
consistent with the exercise of reasonable care, 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
16
errors or omissions in its duties hereunder provided that it has
performed its monitoring and assessment duties under Rule 17f-7 in
accordance with the foregoing standard of care. The risk assessment
shall be provided to the Fund or its Investment Adviser by such means
as the parties shall agree. 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.
8.2.4 SPECIAL TRANSITIONAL RULE. It is acknowledged that Rule
17f-7 has an effective date of July 1, 2001 and that the Custodian
will require a period of time to fully prepare risk assessment
information and to establish a risk monitoring system as provided in
Subsection 8.2.3. Accordingly, until July 1, 2001, the Custodian shall
use reasonable efforts to implement the measures required by
Subsection 8.2.3, and shall in the interim provide to the Fund or its
Investment Adviser the depository information customarily provided and
shall promptly inform the Fund or its Investment Adviser of any
material development affecting the custody risks associated with the
maintenance of assets with a particular Securities Depository of which
it becomes aware in the course of its general duties under this
Agreement or from its duties under Section 8.2.3 as such duties have
been implemented at any given time.
8.3 RESPONSIBILITY FOR SUBCUSTODIANS. Except as provided in the
last sentence of this Section 8.3 the Custodian shall be liable to the Fund for
any losses caused the Fund by any act or omission of any Subcustodian delineated
in the Global Custody Network Listing which constitutes a failure of the
Subcustodian to exercise reasonable care in the performance of its obligations
under the applicable subcustodian agreement. The Custodian hereby represents to
the Fund that each subcustodian agreement in effect while this Custodian
Agreement is in effect does and will require the Subcustodian to exercise
reasonable care in the performance of its obligations. The Custodian shall
nevertheless be liable to the Fund for its own negligence in transmitting any
instructions received by it from the Fund and for its own negligence in
connection with the delivery of any securities or funds held by it to any such
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 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 shall so notify the Fund
and is authorized to designate at its discretion a local safekeeping agent, and
the use of such local safekeeping agent shall be at the sole risk of the Fund,
and accordingly the Custodian shall be responsible to the Fund for the actions
of such agent if and only to the extent the Custodian shall have recovered from
such agent for any damages caused the Fund by such agent.
17
9. RESPONSIBILITY OF THE CUSTODIAN. In performing its duties and
obligations hereunder, the Custodian shall use reasonable care based on the
standards applicable to custodians acting in the market where performance is
effected. Subject to the specific provisions of this Section, the Custodian
shall be liable for any 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.
9.1 LIMITATIONS OF PERFORMANCE. The Custodian shall not be
responsible under this Agreement for any failure to perform its duties, and
shall not be liable hereunder for any loss or damage in association with such
failure to perform to the extent such failure, loss or damage results from:
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 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,
Subcustodian or agent of the Custodian or Subcustodian, as applicable.
9.1.2 COUNTRY RISK. COUNTRY RISK shall mean, with respect to the
acquisition, ownership, settlement or custody of Investments in a
jurisdiction, all risks relating to, or arising in consequence of,
systemic and markets factors affecting the acquisition, payment for or
ownership of Investments including (a) the prevalence of crime and
corruption, (b) the inaccuracy or unreliability of business and
financial information, (c) the instability or volatility of banking
and financial systems, or the absence or inadequacy of an
infrastructure to support such systems, (d) custody and settlement
infrastructure of the market in which such Investments are transacted
and held, (e) the acts, omissions and operation of any Securities
Depository, (f) the
18
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 is acquired or held hereunder or under a Subcustody
Agreement, (a) any act of war, terrorism, riot, insurrection or civil
commotion, (b) the imposition of any investment, repatriation or
exchange control restrictions by any Governmental Authority, (c) the
confiscation, expropriation or nationalization of any Investments by
any Governmental Authority, whether de facto or de jure, (iv) any
devaluation 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 to the extent it arises from the
following causes:
9.2.1 FAILURE OF THIRD PARTIES. The failure of any third party
including: (a) any issuer of Investments or book-entry or other agent
of and 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
Adviser, 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 and further provided, in all events,
that the Custodian has exercised reasonable care based on the
standards applicable to custodians in the relevant market.
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, certificate of incorporation or by-laws,
Applicable Law, or actions by the trustees, directors 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 provided the Custodian has acted in
accordance with Instructions.
10. INDEMNIFICATION. The Fund hereby indemnifies the Custodian and
each Subcustodian, and their respective agents, nominees and the partners,
employees, officers and directors (collectively, the "Indemnitees"), and agrees
to hold each of them harmless from and against all claims and liabilities,
including counsel fees and taxes, incurred or assessed against any of them in
connection with the performance of this Agreement and any Instruction except as
may arise from a breach of the relevant standard of care by an Indemnitee. In
the event the Custodian intends to make any
19
payment to a Subcustodian under the indemnification provisions of any
subcustodian agreement, the Custodian shall give the Fund written notice of such
intention no less than thirty (30) calendar days prior to the date such payment
is to be made. The Fund shall be obligated promptly to reimburse the Custodian
the amount of such payment, unless the Fund shall object in writing within
twenty-one (21) calendar days of receipt of the Custodian's notice to such
payment to the Subcustodian or to reimbursement of the Custodian (i) because the
Fund disputes the right of the Subcustodian to be so indemnified or (ii) because
the Fund believes that the Custodian is responsible by reason of the Custodian's
negligence or misconduct for the event or occurrence giving rise to the
Subcustodian's demand for indemnification. In the event the Fund shall give the
aforesaid written notice of objection and the reasons therefor, the Custodian
may nevertheless make such payment to the Subcustodian without prejudice to the
Custodian's right to bring an action against and recover from the Fund for such
reimbursement; or in the alternative, the Custodian may refuse to pay the
indemnification demanded by the Subcustodian and the Fund shall in such event
indemnify and hold the Custodian harmless in respect of any recovery the
Subcustodian may obtain against the Custodian, together with the Custodian's
costs and expenses including reasonable attorneys' fees and out-of-pocket
expenses, of defending against any judicial or other proceeding pursuant to
which such recovery was obtained.
11. REPORTS, RECORDS, AND CALCULATION OF NET ASSET VALUE. The Custodian
shall:
11.1 create and maintain such records relating to the performance
of its obligations under this Agreement as may be required under the
1940 Act and other Applicable Law;
11.2 make available to the Fund, its auditors, agents and
employees, during regular business hours of the Custodian, upon
reasonable request and during normal business hours of the Custodian,
all records maintained by the Custodian pursuant to paragraph 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.
20
In addition, the Custodian shall compute the net asset value per
share of capital stock of the Fund as of the close of business on the New York
Stock Exchange on each day on which the Exchange is open, unless otherwise
directed, as follows:
Such computation and determination shall be made in accordance with
(1) the provisions of the Fund's Declaration of Trust or Certificate of
Incorporation and By-Laws, as they may from time to time be amended and
delivered to the Custodian, (2) the votes of the Board of Trustees or Directors
of the Fund at the time in force and applicable, as they may from time to time
be delivered to the Custodian, and (3) Instructions. On each day that the
Custodian shall compute the net asset value per share of the Fund, the Custodian
shall provide the Fund's Investment Adviser with written reports which the
Investment Adviser will use to verify that portfolio transactions have been
recorded in accordance with the Fund's instructions and are reconciled with the
Fund's trading records.
In computing the net asset value, the Custodian may rely upon any
information furnished by Instructions, including without limitation any
information (1) as to accrual of liabilities of the Fund and as to liabilities
of the Fund not appearing on the books of account kept by the Custodian, (2) as
to the existence, status and proper treatment of reserves, if any, authorized by
the Fund, (3) as to the sources of quotations to be used in computing the net
asset value, including those listed in Appendix B, (4) as to the fair value to
be assigned to any securities or other property for which price quotations are
not readily available, and (5) as to the sources of information with respect to
"corporate actions" affecting portfolio securities of the Fund, including those
listed in Appendix B. (Information as to "corporate actions" shall include
information as to dividends, distributions, stock splits, stock dividends,
rights offerings, conversions, exchanges, recapitalizations, mergers,
redemptions, calls, maturity dates and similar transactions, including the ex-
and record dates and the amounts or other terms thereof.) The Fund may instruct
the Custodian to utilize a particular source for the valuation of a specific
security or other property and, provided that the Custodian has exercised
reasonable care, the Custodian shall be protected in utilizing the valuation
provided by such source without further inquiry in order to
21
effect calculation of the Fund's net asset value. Notwithstanding anything in
this Agreement to the contrary, the Custodian shall not be responsible for the
failure of the Fund or its Investment Adviser to provide the Custodian with
Instructions regarding liabilities which ought to be included in the calculation
of the Fund's net asset value.
In like manner, the Custodian shall compute and determine the net
asset value as of such other times as the Board of Trustees or Directors of the
Fund from time to time may reasonably request.
Notwithstanding any other provisions of this Agreement, the following
provisions shall apply with respect to the Custodian's foregoing
responsibilities in this Section: the Custodian shall be held to the exercise of
reasonable care in computing and determining net asset value as provided in this
Section, but shall not be held accountable or liable for any losses, damages or
expenses the Fund or any shareholder or former shareholder of the Fund may
suffer or incur arising from or based upon errors or delays in the determination
of such net asset value unless such error or delay was due to the Custodian's
negligence, bad faith or willful misconduct in determination of such net asset
value. The parties hereto acknowledge, however, that the Custodian's causing an
error or delay in the determination of net asset value may, but does not in and
of itself, constitute negligence, bad faith or willful misconduct. In no event
shall the Custodian be liable of responsible to the Fund, any present or former
shareholder of the Fund of any other party for any error or delay which
continued or was undetected after the date of an audit performed by the
certified public accountants employed by the Fund if, in the exercise of
reasonable care in accordance with generally accepted accounting standards, such
accountants should have become aware of such error or delay in the course of
performing such audit. The Custodian's liability for any such gross negligence
or willful misconduct which results in an error in determination of such net
asset value shall be limited to direct, out-of pocket loss that the Fund,
shareholder or former shareholder shall actually incur, measured by the
difference between the actual and the erroneously computed net asset value, and
any expense the Fund shall incur in connection with correcting the records of
the Fund affected by such error (including charges made by the Fund's register
and transfer agent for making such corrections) or communicating with
22
shareholders or former shareholders of the Fund affected by such error.
Without limiting the foregoing, the Custodian shall not be held
accountable or liable to the Fund, any shareholder or former shareholder thereof
or any other person for any delays or losses, damages or expenses any of them
may suffer or incur resulting from (1) the Custodian's failure to receive timely
and suitable notification concerning quotations or corporate actions relating to
or affecting the portfolio securities of the Fund, or (2) any errors in the
computation of the net asset value based upon or arising out of quotations or
information as to corporate actions if received by the Custodian either (i) from
a source which the Custodian was authorized pursuant to this Section to rely
upon, or (ii) from a source which in the Custodian's reasonable judgment was as
reliable a source for such quotations or information as the sources authorized
pursuant to this section. Nevertheless, the Custodian will use its best judgment
in determining whether to verify through other sources any information it has
received as to quotations or corporate actions if the Custodian has reason to
believe that any such information might be incorrect.
In the event of any error or delay in the determination of such net
asset value for which the Custodian may be liable, the Fund and the Custodian
will consult and make good faith efforts to reach agreement on what actions
should be taken in order to mitigate any loss suffered by the Fund or its
present or former shareholders, in order that the Custodian's exposure to
liability shall be reduced to the extent possible after taking into account all
relevant factors and alternatives. Such actions might include the Fund of the
Custodian taking reasonable steps to collect from any shareholder or former
shareholder who has received any overpayment upon redemption of shares such
overpaid amount or to collect from any shareholder who has underpaid upon a
purchase of shares the amount of such underpayment to reduce the number of
shares issued to such shareholder. It is understood that in attempting to reach
agreement on the action to be taken or the amount of the loss which should
appropriately be borne by the Custodian, the Fund and the Custodian will
consider such relevant factors as the amount of the loss involved, the Fund's
desire to avoid loss of shareholder good will, the fact that other persons or
entities could have been reasonably expected to have detected the
23
error sooner than the time it was actually discovered, the
appropriateness of limiting or eliminating the benefit which shareholders or
former shareholders might have obtained by reason of the error, and the
possibility that other parties providing services to the Fund might be induced
to absorb a portion of the loss incurred.
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
necessary or desirable for the Custodian to provide, or to cause any
Subcustodian to provide, custody services.
12.2 ENTIRE AGREEMENT. Except as specifically provided herein,
this Agreement 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. This Agreement supersedes and replaces a Custodian Agreement
dated December 10, 1997 by and between the Custodian and Aetna variable
Portfolios, Inc. -Aetna International Portfolio, as amended to date.
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
shall, 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.
24
In connection with the operation of this Agreement, the Custodian
and the Fund may agree in writing from time to time on such provisions
interpretative of or in addition to the provisions of this Agreement as may in
their joint opinion be consistent with the general tenor of this Agreement. No
interpretative or additional provisions made as provided in the preceeding
sentence shall be deemed to be an amendment to this Agreement.
12.4 GOVERNING LAW AND JURISDICTION. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH, AND BE GOVERNED BY THE LAWS OF, THE COMMONWEALTH
OF MASSACHUSETTS, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW OF SUCH STATE.
THE PARTIES HERETO IRREVOCABLY CONSENT TO THE EXCLUSIVE JURISDICTION OF THE
COURTS OF THE COMMONWEALTH OF MASSACHUSETTS AND THE FEDERAL COURTS LOCATED IN
THE COMMONWEALTH OF MASSACHUSETTS DISTRICT OF BOSTON.
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:
Aetna Series Fund, Inc.
00 Xxxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000-0000
Attn: Legal Department
Xxxxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile (000) 000-0000
25
If to the Custodian:
Xxxxx Brothers Xxxxxxxx & Co.
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Manager, Securities Department
Telephone: (000) 000-0000
Facsimile: (000) 000-0000,
or such other address as the Fund or the Custodian may have designated
in writing to the other.
12.6 HEADINGS. Paragraph headings included herein are for
convenience of reference only and shall not modify, define, expand or limit any
of the terms or provisions hereof.
12.7 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original. This Agreement shall
become effective when one or more counterparts have been signed and delivered by
the Fund and the Custodian.
12.8 CONFIDENTIALITY. The parties hereto agree that each shall
treat confidentially 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.
12.9 COUNSEL. The Custodian shall be without liability for any
action reasonably taken or omitted pursuant to the advice of (i) counsel
regularly retained by the Custodian in respect of custodian matters, (ii)
counsel for the Fund or (iii) such counsel as the Fund and the Custodian may
agree upon, provided, however, with respect to the
26
performance of any action or omission of any action upon such advice, the
Custodian shall be required to conform to the relevant standard of care under
this Agreement.
13. DEFINITIONS. The following defined terms will have the respective meanings
set forth below.
13.1 ADVANCE(S) shall mean any extension of credit by or through the
Custodian or by or through any Subcustodian pursuant to Section 7.6 and shall
include amounts paid to third parties for account of the Fund or in discharge of
any expense, tax or other item payable by the Fund.
13.2 AGENCY ACCOUNT(S) shall mean any deposit account opened on the
books of a Subcustodian or other banking institution in accordance with Section
7.1.
13.3 AGENT(S) shall have the meaning set forth in the last sentence
of Section 6.14.
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(S) 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(S) shall mean an entity acting as agent for
the issuer of Investments for purposes of recording ownership or similar
entitlement to Investments, including without limitation a transfer agent or
registrar.
13.7 CLEARING CORPORATION(S) shall mean any entity or system
established for purposes of providing securities settlement and movement and
associated functions for a given market that meets the requirements of the 1940
Act for custody of the Fund's Investments.
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 any foreign custody manager
for the Fund appointed pursuant to Rule 17f-5 of the 1940 Act.
13.10 FOREIGN FINANCIAL REGULATORY AUTHORITY shall have the meaning
given by Section 2(a)(50) of the 0000 Xxx.
13.11 INSTRUCTION(S) shall have the meaning assigned in Section 4.
13.12 INVESTMENT ADVISER 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.
13.13 INVESTMENT(S) shall mean any investment asset of the Fund,
including without limitation securities, bonds, notes, and debentures as well as
receivables, derivatives, contractual rights or entitlements and other
intangible assets.
13.14 MARGIN ACCOUNT shall have the meaning set forth in Section 6.4
hereof.
27
13.15 PRINCIPAL ACCOUNT shall mean deposit accounts of the Fund
carried on the books of BBH&Co. as principal in accordance with Section 7.
13.16 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.
13.17 SECURITIES DEPOSITORY(IES) 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,
(i) if a foreign Securities Depository, meets the definitional requirements of
Rule 17f-7 under the 1940 Act, and (ii) if a domestic Securities Depository,
meets the definitional requirements of Rule 17f-4 under the 1940 Act.
13.18 SUBCUSTODIAN(S) shall mean each domestic and foreign bank
appointed by the Custodian pursuant to Section 8, but shall not include
Securities Depositories.
13.19 TRI-PARTY AGREEMENT shall have the meaning set forth in Section
6.4 hereof.
13.20 1940 ACT shall mean the Investment Company Act of 1940.
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 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
calendar 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
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. 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
28
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.
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. AETNA SERIES FUND, INC.-
AETNA INTERNATIONAL FUND
By: __________________________________ By: ________________________________
Name: Name:
Title: Title:
Date: Date:
29
FUNDS TRANSFER SERVICES SCHEDULE TO CUSTODIAN AGREEMENT
1. Execution of Payment Orders. Xxxxx Brothers Xxxxxxxx & Co. (the CUSTODIAN) is
hereby instructed by AETNA SERIES FUND, INC. - AETNA INTERNATIONAL FUND (the
FUND) to execute each payment order, whether denominated in United States
dollars or other applicable currencies, received by the Custodian in the Funds's
name as sender and authorized and confirmed by an Authorized Person as defined
in a Custodian Agreement dated as of ______________, 2001 by and between the
Custodian and the Fund, as amended or restated from time thereafter (the
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 Company hereby elects (PLEASE
CHOOSE ONE) the following Security Procedure as described below:
[ ] BIDS and BIDS Worldview Payment Products. BIDS and BIDS Worldview Payment
Products, are on-line payment order authorization facilities with built-in
authentication procedures. The Custodian and the Company shall each be
responsible for maintaining the confidentiality of passwords or other
codes to be used by them in connection with BIDS. The Custodian will act
on instructions received through BIDS without duty of further confirmation
unless the 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.
[ ] 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 Fund 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 may call the Fund at its last known telephone
number, request to speak to the Fund or Authorized Person,
and confirm the authorization and the details of the payment
order (a CALLBACK); or
2. If the telefax requests a non-repetitive order, the
Custodian will perform a Callback.
All faxes must be accompanied by a fax cover sheet which indicates the
sender's name, company name, telephone number, fax number, number of
pages, and number of transactions or instructions attached.
30
[ ] 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, the Custodian may
perform a Callback; or
2. If a telephonic non-repetitive payment order, the Custodian
will perform a Callback.
In the event the Fund chooses a procedure which is not a Security Procedure as
described above, the Fund agrees to be bound by any payment order (whether or
not authorized) issued in its name and accepted by the Custodian in compliance
with the procedure selected by the Fund.
3. Rejection of Payment Orders. The Custodian shall give the Fund prompt
notice of the Custodian's rejection of a payment order. Such notice may be given
in writing, by facsimile transmission or orally by telephone to such address(es)
or telephone number(s) as may be designated by the Fund, each of which is hereby
deemed commercially reasonable. In the event the Custodian fails to execute a
properly executable payment order and fails to give the Fund notice of the
Custodian's non-execution, the Custodian shall be liable only for theFund'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
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 Company pursuant to this 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 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 be liable for
interest on the amount of any payment order that was not authorized or was
erroneously executed provided 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 that is
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 Company except to the extent any such tax, fine,
cost, charge or fee results from Custodian's negligence, willful misconduct or
breach of any provision of this Funds Transfer Services Schedule.
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
31
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.
8. Indemnification. The Custodian does not recommend the sending of
instructions by telefax or telephonic means as provided in Paragraph 2. BY
ELECTING TO SEND INSTRUCTIONS BY TELEFAX OR TELEPHONIC MEANS, THE FUND AGREES TO
INDEMNIFY THE CUSTODIAN AND ITS PARTNERS, OFFICERS AND EMPLOYEES (EACH, AN
"INDEMNITEE") FOR ALL LOSSES THEREFROM, EXCEPT TO THE EXTENT THAT SUCH LOSSES
RESULT FROM AN INDEMNITEE'S NEGLIGENCE, BAD FAITH, WILLFUL MISCONDUCT OR BREACH
OF THE TERMS OF THIS FUNDS TRANSFER SERVICES SCHEDULE.
_____________________________________________
OPTIONAL: The Custodian will perform a callback if instructions
are sent by telefax or telephonic means as provided in Paragraph 2.
THE FUND MAY, AT ITS OWN RISK AND BY HEREBY AGREEING TO INDEMNIFY
THE CUSTODIAN AND ITS PARTNERS, OFFICERS AND EMPLOYEES FOR ALL
LOSSES THEREFROM, ELECT TO WAIVE A CALLBACK BY THE CUSTODIAN BY
INITIALLING HERE:____
_____________________________________________
Accepted and agreed:
XXXXX BROTHERS XXXXXXXX & CO. AETNA SERIES FUND, INC.-
AETNA INTERNATIONAL FUND
By: _______________________________ By: ________________________________
Name: Name:
Title: Title:
Date: Date:
32
17f-5 DELEGATION SCHEDULE
-------------------------
By its execution of this Delegation Schedule dated as of _____________,
2001 AETNA SERIES FUND, INC. - AETNA INTERNATIONAL FUND 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
(the FUND), hereby appoints XXXXX BROTHERS XXXXXXXX & CO., a New York limited
partnership with an office in Boston, Massachusetts (the DELEGATE) as its
delegate to perform certain functions with respect to the custody of 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 dated as of the date hereof executed by
and between the Fund and the Delegate (the CUSTODIAN AGREEMENT) to place and
maintain the Fund's Assets in countries outside the United States in accordance
with Instructions received from the Fund's Investment Adviser. Such instruction
shall represent an Instruction under the terms of the Custodian Agreement. The
Fund acknowledges that - (a) the Delegate shall perform services hereunder only
with respect to the countries where it provides custodial services to the Fund
under the Custodian Agreement; (b) depending on conditions in the particular
country, advance notice may be required before the Delegate shall be able to
perform its duties hereunder in or with respect to such country (such advance
notice to be reasonable in light of the specific facts and circumstances
attendant to performance of duties in such country); and (c) nothing in this
Delegation Schedule shall require the Delegate to provide delegated or custodial
services in any country, and there may from time to time be countries as to
which the Delegate determines it will not provide delegation services.
2. Delegation. Pursuant to the provisions of Rule 17f-5 under the 1940 Act,
the Board hereby delegates to the Delegate, and the Delegate hereby accepts such
delegation and agrees to perform, 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
1
actions on behalf of or in the name of the Fund as are reasonably required to
discharge its duties under this Delegation Schedule, including, without
limitation, to cause the Fund's Assets to be placed with a particular Eligible
Foreign Custodian in accordance herewith. The Fund confirms to the Delegate that
the Fund or the Investment Adviser has considered the Sovereign Risk and
prevailing country risk as part of its continuing investment decision process,
including such factors as may be reasonably related to the systemic risk of
maintaining the Fund's Assets in a particular country, including, but not
limited to, financial infrastructure, prevailing custody and settlement systems
and practices (including the use of any Securities Depository in the context of
information provided by the Custodian in the performance of its duties as
required under Rule 17f-7 and the terms of the Custodian Agreement governing
such duties), and the laws relating to the safekeeping and recovery of the
Fund's Assets held in custody pursuant to the terms of the Custodian Agreement.
3. Selection of Eligible Foreign Custodian and Contract Administration. The
Delegate shall perform the following duties with respect to the selection of
Eligible Foreign Custodians and administration of certain contracts governing
the Fund's foreign custodial arrangements:
(a) Selection of Eligible Foreign Custodian. The Delegate shall place
and maintain the Fund's Assets with an Eligible Foreign Custodian; provided that
the Delegate shall have determined that the Fund's Assets will be subject to
reasonable care based on the standards applicable to custodians in the relevant
market after considering all factors relevant to the safekeeping of such assets
including without limitation:
(i) The Eligible Foreign Custodian's practices, procedures, and
internal controls, including, but not limited to, the physical protections
available for certificated securities (if applicable), the controls and
procedures for dealing with any Securities Depository, the method of
keeping custodial records, and the security and data protection practices;
(ii) Whether the Eligible Foreign Custodian has the requisite
financial strength to provide reasonable care for the Fund's Assets;
(iii) The Eligible Foreign Custodian's general reputation and standing;
and
(iv) Whether the Fund will have jurisdiction over and be able to
enforce judgments against the Eligible Foreign Custodian, such as by
virtue of the existence of any offices of such Eligible Foreign Custodian
in the United States or such Eligible Foreign Custodian's appointment of
an agent for service of process in the United States or consent to
jurisdiction in the United
2
States.
The Delegate shall be required to make the foregoing determination subject to
Section 9 and to the best of its knowledge and belief based only on information
reasonably available to it.
(b) Contract Administration. The Delegate shall cause that the
foreign custody arrangements with an Eligible Foreign Custodian shall be
governed by a written contract that the Delegate has determined will provide
reasonable care for Fund Assets based on the standards applicable to custodians
in the relevant market. Each such contract shall, except as set forth in the
last paragraph of this subsection (b), include provisions that provide:
(i) For indemnification or insurance arrangements (or any combination
of the foregoing) such that the Fund will be adequately protected against
the risk of loss of assets held in accordance with such contract;
(ii) That the Fund's Assets will not be subject to any right, charge,
security interest, lien or claim of any kind in favor of the Eligible
Foreign Custodian or its creditors except a claim of payment for their
safe custody or administration or, in the case of cash deposits, liens or
rights in favor of creditors of such Custodian arising under bankruptcy,
insolvency or similar laws;
(iii) That beneficial ownership of the Fund's Assets will be freely
transferable without the payment of money or value other than for safe
custody or administration;
(iv) That adequate records will be maintained identifying the Fund's
Assets as belonging to the Fund or as being held by a third party for the
benefit of the Fund;
(v) That the Fund's independent public accountants will be given
access to those records described in (iv) above or confirmation of the
contents of such records; and
(vi) That the Delegate will receive sufficient and timely periodic
reports with respect to the safekeeping of the Fund's Assets, including,
but not limited to, notification of any transfer to or from the Fund's
account or a third party account containing the Fund's Assets.
Such contract may contain, in lieu of any or all of the provisions
specified in this Section 3 (b), such other provisions that the Delegate
determines will provide, in their entirety, the same or a greater level of
care and protection for the Fund's Assets as the specified provisions, in
their entirety.
3
(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
performance of the contract governing the Fund's arrangements under Section 3(b)
of this Delegation Schedule.
5. Reporting. At least annually and more frequently as specified by the
Board, the Delegate shall provide to the Board written reports specifying
placement of the Fund's Assets with each Eligible Foreign Custodian selected by
the Delegate pursuant to Section 3 of this Delegation Schedule and shall
promptly report as to any material changes to such foreign custody arrangements.
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. Scope of Delegation. The authority delegated by this Agreement in
connection with Rule 17f-5 applies only with respect to the Fund's Assets held
in the jurisdictions listed in Global Custody Network Listing. The Delegate may
add a jurisdiction to Global Custody Network Listing by providing notice of such
additional jurisdiction to the Fund.
The Fund may withdraw its delegation to Delegate with respect to any
jurisdiction upon written notice to Delegate. Delegate may withdraw its
acceptance of delegation with respect to any jurisdiction upon written notice to
the Fund. In either event, Exhibit A shall be amended to reflect the withdrawal
of delegation or acceptance, as the case may be. Thirty calendar days (or, if
such time period is less than reasonably practicable, such longer period as to
which the parties agree in such event) after receipt of any such notice by the
party other than the party giving notice, Delegate shall have no further
responsibility or authority under this Delegation Agreement with respect to the
jurisdiction(s) as to which delegation or acceptance is withdrawn.
7. Withdrawal of Fund's Assets. If the Delegate determines that an
arrangement with a
4
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 and
make arrangement for the custody of such Assets with a successor Eligible
Foreign Custodian in accordance with the terms of this Schedule, as soon as
reasonably practicable; provided, however, that if in the reasonable judgment of
the Delegate, such withdrawal would require liquidation of any of the Fund's
Assets or would materially impair the liquidity, value or other investment
characteristics of the Fund's Assets, it shall be the duty of the Delegate to
promptly provide information regarding the particular circumstances and to act
only in accordance with Instructions of the Fund or its Investment Adviser with
respect to such liquidation or other withdrawal.
8. Direction as to Eligible Foreign Custodian. Notwithstanding this
Delegation Schedule, the Fund, acting through its Board, its Investment Advisor
or its other authorized representative, may direct the Delegate to place and
maintain the Fund's Assets with a particular Eligible Foreign Custodian,
including without limitation with respect to investment in countries as to which
the Custodian will not provide delegation services. In such event, the Delegate
shall be entitled to rely on any such instruction as a 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.
9. Standard of Care. In carrying out its duties under this Delegation
Schedule, the Delegate agrees to exercise reasonable care, prudence and
diligence such as a person having responsibility for safekeeping the Fund's
Assets would exercise.
10. 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
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.
11. 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
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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.
12. 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.
13. 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, and such cash and cash equivalents as are
reasonably necessary to effect the Fund's transactions in such
investments.
c. 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.
14. Governing Law and Jurisdiction. This Delegation Schedule shall be
construed in accordance with the laws of the Commonwealth of Massachusetts. The
parties hereby submit to the exclusive jurisdiction of the Federal courts
sitting in the Commonwealth of Massachusetts or of the state courts of such
Commonwealth.
15. Fees. Delegate shall perform its functions under this Delegation
Schedule for the compensation determined under the Custodian Agreement.
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16. 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.
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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. AETNA SERIES FUND, INC. -
AETNA INTERNATIONAL FUND
By: ________________________ By: ________________________________
Name: Name:
Title: Title:
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