Exhibit (g)(2)
FOREIGN CUSTODIAN MONITORING AGREEMENT
AGREEMENT made as of May 24, 2001 between The Armada Advantage Fund, a
Massachusetts business trust (the "Trust"), and National City Bank ("NCB").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and NCB is a U.S. Bank as defined in Rule 17f-5 under the 1940 Act;
WHEREAS, the Trust has retained NCB to furnish custody and other
services;
WHEREAS, the Board of Trustees of the Trust wishes to delegate to NCB
the responsibility of monitoring the Trust's foreign custody arrangements and
custody risks as provided in Rule 17f-5 and Rule 17f-7 under the 1940 Act, and
NCB is willing to undertake such responsibility;
WHEREAS, the Trust desires to place and maintain Foreign Assets with
one or more Eligible Securities Depositories as provided and defined in Rules
17f-5 and 17f-7 under the 1940 Act; and
WHEREAS, the Board of Trustees of the Trust has determined that it is
reasonable to rely on NCB to perform the responsibilities delegated to it under
this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and intending to be legally bound, the parties hereto agree as
follows:
1. The Trust hereby delegates to NCB the responsibility of monitoring
arrangements with Eligible Foreign Custodians (as defined in Rule 17f-5 under
the 0000 Xxx) for the Trust's existing and future investment portfolios in
accordance with Rule 17f-5, and NCB accepts such delegation and agrees to
furnish the services set forth herein.
2. With respect to each Eligible Foreign Custodian that holds assets of
any investment portfolio of the Trust, NCB shall:
(a) determine that the Trust's assets will be subject to
reasonable care, based on the standards applicable to
custodians in the relevant market, if maintained with such
Eligible Foreign Custodian, 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 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 Trust's assets;
(iii) the Eligible Foreign Custodian's general
reputation and standing; and
(iv) whether the Trust 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 the Eligible Foreign Custodian in
the United States or the Eligible Foreign Custodian's
consent to service of process in the United States;
(b) determine that the written contract with such Eligible
Foreign Custodian governing the foreign custody arrangements
will provide reasonable care for the Trust's assets based on
the standards specified in paragraph 2(a) above, and that such
contract includes provisions that at least provide the
following; provided, however, that such contract may contain,
in lieu of any or all of the provisions specified in (b)(i)
through (b)(v), such other provisions that NCB determines will
provide, in their entirety, the same or a greater level of
care and protection for the Trust's assets as those provided
in (b)(i) through (b)(v) in their entirety:
(i) for indemnification or insurance arrangements (or
any combination of the foregoing) such that the Trust
will be adequately protected against the risk of loss
of assets held in accordance with such contract;
(ii) that the Trust's assets will not be subject to
any right, charge, security interest, lien or claim
of any kind in favor of the 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
the Eligible Foreign Custodian arising under
bankruptcy, insolvency, or similar laws;
(iii) that beneficial ownership of the Trust'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 assets as belonging to the Trust or
as being held by a third party for the benefit of the
Trust and that the Trust's independent public
accountants will be given access to those records or
confirmation of the contents of those records; and
(v) that the Trust will receive periodic reports with
respect to the safekeeping of the Trust's assets,
including, but not limited to, notification of any
transfer to or from the Trust's account or a third
party account
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containing assets held for the benefit of the Trust;
(c) establish a system to monitor the appropriateness of
maintaining the Trust's assets with such Eligible Foreign
Custodian and the contract governing the Trust's foreign
custody arrangements;
(d) provide to the Trust's Board of Trustees, at least
annually, written reports notifying the Board of the placement
of the Trust's assets with a particular Eligible Foreign
Custodian and quarterly reports of any material change in the
Trust's foreign custody arrangements; and
(e) withdraw the Trust's assets from any Eligible Foreign
Custodian as soon as reasonably practicable, if the foreign
custody arrangement no longer meets the requirements of Rule
17f-5.
3. In providing the services set forth in Paragraphs 1 and 2 above, NCB
agrees to exercise reasonable care, prudence and diligence such as a person
having responsibility for the safekeeping of the Trust's assets would exercise.
4. NCB shall provide, or cause its agent to provide, to the Trust or
its investment adviser an analysis of the custody risks associated with
maintaining assets with each Eligible Securities Depository.
5. NCB shall monitor the custody risks associated with maintaining
assets with each Eligible Securities Depository on a continuing basis and
promptly notify the Trust or its investment adviser of any material change in
these risks.
6. In providing the services set forth in Paragraphs 4 and 5 above, NCB
shall exercise reasonable care, prudence and diligence.
7. If NCB believes that a custody arrangement with an Eligible
Securities Depository no longer meets the requirements of Rule 17f-7, (a) NCB
shall cause the Trust's assets with such depository to be withdrawn as soon as
reasonably practicable, or (b) NCB shall immediately inform the investment
adviser responsible for managing such assets.
8. NCB may contract with one or more agents authorized by the Board to
engage in management or custody of the Trust's assets to assist it in
discharging the responsibilities provided for by this Agreement but, in doing
so, shall not be relieved of its obligations under this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the day and
year first above written.
THE ARMADA ADVANTAGE FUND
By: /s/ X.X. Xxxxxxx
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Name: X.X. Xxxxxxx
Title:
NATIONAL CITY BANK
By: /s/ Xxxxxx X. Xxxxxx
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Name: Xxxxxx X. Xxxxxx
Title: Senior Vice President
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