Exhibit (j)
CUSTODIAN AGREEMENT
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THIS AGREEMENT, dated as of ___________ 2002, between JAPAN SMALLER
CAPITALIZATION FUND, INC., a closed-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"),
WITNESSETH:
WHEREAS, the Fund wishes to employ BBH&Co. to act as custodian for the
Fund and to provide related services, all as provided herein, and BBH&Co. is
willing to accept such employment, subject to the terms and conditions herein
set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Fund and BBH&Co. hereby agree, as follows:
1. Appointment of Custodian. The Fund hereby appoints BBH&Co. as the Fund's
custodian, and BBH&Co. hereby accepts such appointment. All Investments of the
Fund delivered to the Custodian or its agents or Subcustodians shall be dealt
with as provided in this Agreement. The duties of the Custodian with respect
to the Fund's Investments shall be only as set forth expressly in this
Agreement which duties are generally comprised of safekeeping and various
administrative duties that will be performed in accordance with Instructions
and as reasonably required to effect Instructions.
2. Representations, Warranties and Covenants of the Fund. The Fund hereby
represents, warrants and covenants each of the following:
2.1 This Agreement has been, and at the time of delivery of each
Instruction such Instruction will have been, duly authorized, executed
and delivered by the Fund. This Agreement does not violate any Applicable
Law or conflict with or constitute a default under the Fund's prospectus
or other organic document, agreement, judgment, order or decree to which
the Fund is a party or by which it or its Investments is bound.
2.2 By providing an Instruction with respect to the first
acquisition of an Investment in a jurisdiction other than the United
States of America, the Fund shall be deemed to have confirmed to the
Custodian that the Fund has (a) assessed and accepted all material
Country or Sovereign Risks and accepted responsibility for their
occurrence, (b) made all determinations required to be made by the Fund
under the 1940 Act, and (iii) appropriately and adequately disclosed to
its shareholders, 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 each party's 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 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, an Authorized Person shall
be a person or entity authorized to give Instructions for or on behalf of the
Fund by written notices to the Custodian or otherwise in accordance with
procedures delivered to and acknowledged by the Custodian, including without
limitation the Fund's Investment Adviser or Foreign Custody Manager. The
Custodian may treat any Authorized Person as having full authority of the Fund
to issue Instructions hereunder unless the notice of authorization contains
explicit limitations as to said authority. The Custodian shall be entitled to
rely upon the authority of Authorized Persons until it receives appropriate
written notice from the Fund to the contrary.
4.2 Form of Instruction. Each Instruction shall be transmitted by such
secured or authenticated electromechanical 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.
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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. Oral Instructions shall be binding upon the Custodian only if
and when the Custodian takes action with respect thereto. With respect to
telefax instructions, the parties agree and acknowledge that receipt of
legible instructions cannot be assured, that the Custodian cannot verify that
authorized signatures on telefax instructions are original or properly
affixed, and that the Custodian shall not be liable for losses or expenses
incurred through actions taken in reliance on inaccurately stated, illegible
or unauthorized telefax instructions. The provisions of Section 4A of the
Uniform Commercial Code shall apply to Funds Transfers performed in accordance
with 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 Consents 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 and currency information. Where an Instruction
is communicated by electronic means, or otherwise where an Instruction
contains an identifying number such as a CUSIP, SEDOL or ISIN number, the
Custodian shall be entitled to rely on such number as controlling
notwithstanding any inconsistency contained in such Instruction,
particularly with respect to Investment description; and
4.3.4 The name of the broker or similar entity concerned with
execution of the transaction.
If the Custodian shall determine that an Instruction is either unclear or
incomplete, the Custodian may give prompt notice of such determination to the
Fund, and the Fund shall thereupon amend or otherwise reform such Instruction.
In such event, the Custodian shall have
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no obligation to take any action in response to the Instruction initially
delivered until the redelivery of an amended or reformed Instruction.
4.4 Timeliness of Instructions. In giving an Instruction, the Fund shall
take into 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 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
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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 replace such Investment, or in the event that
such replacement cannot be effected, the Custodian shall pay to the Fund the
fair market value of such Investment based on the last available price as of
the close of business in the relevant market on the date that a claim was
first made to the Custodian with respect to such loss, or, if less, such other
amount as shall be agreed by the parties as the date for settlement.
6. Administrative Duties of the Custodian. The Custodian shall perform the
following administrative duties with respect to Investments of the Fund.
6.1 Purchase of Investments. Pursuant to Instruction, Investments
purchased for the account of the Fund shall be paid for (a) against delivery
thereof to the Custodian or a Subcustodian, as the case may be, either
directly or through a Clearing Corporation or a Securities Depository (in
accordance with the rules of such Securities Depository or such Clearing
Corporation), or (b) otherwise in accordance with an Instruction, Applicable
Law, generally accepted trade practices, or the terms of the instrument
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 and Receipt in Connection with Borrowings of the Fund, or
other Collateral and Margin Requirements. Pursuant to Instruction, the
Custodian may deliver or receive Investments or cash of the Fund in connection
with borrowings or loans by the Fund 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
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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 l7f-6. The Custodian shall in no event be responsible for the acts and
omissions of any futures commission merchant to whom Investments are delivered
pursuant to this Section; for the sufficiency of Investments held in any
Margin Account; or, for the performance of any terms of any exchange-traded
futures contracts and commodity options.
6.5 Contractual Obligations and Similar Investments. From time to time,
the Fund's Investments may include Investments that are not ownership
interests as may be represented by certificate (whether registered or bearer),
by entry in a Securities Depository or by book entry agent, registrar or
similar agent for recording ownership interests in the relevant Investment. If
the Fund shall at any time acquire such Investments, including without
limitation deposit obligations, loan participations, repurchase agreements and
derivative arrangements, the Custodian shall (a) receive and retain, to the
extent the same are provided to the Custodian, confirmations or other
documents evidencing the arrangement, and (b) perform on the Fund's account in
accordance with the terms of the applicable arrangement, but only to the
extent directed to do so by Instruction. 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 the name of an entity allowable under
Section 5.3; and (c) for a different number of certificates or instruments
representing the same number of shares or the same principal amount of
indebtedness.
6.8 Rights, Warrants, Etc. Pursuant to Instruction, the Custodian shall
(a) deliver warrants, puts, calls, rights or similar securities to the issuer
or trustee thereof, or to any agent of such issuer or trustee, for purposes of
exercising such rights or selling such securities, and (b) deposit securities
in response to any invitation for the tender thereof.
6.9 Mandatory Corporate Actions. Unless otherwise directed by
Instruction, the Custodian shall: (a) comply with the terms of all mandatory
or compulsory exchanges, calls, tenders, redemptions or similar rights of
securities ownership affecting securities held on the Fund's account and
promptly notify the Fund of such action, and (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 any amount due and payable to the Fund with respect to
Investments and promptly credit the amount collected to a Principal or Agency
Account; provided, however, that the Custodian shall not be responsible for:
(a) the collection of amounts due and payable with respect to Investments that
are in default, or (b) the collection of cash or share entitlements with
respect to Investments that are not registered in the name of the Custodian or
its Subcustodians. The Custodian is hereby authorized to endorse and deliver
any instrument required to be so endorsed and delivered to effect collection
of any amount due and payable to the Fund with respect to Investments.
6.11 Ownership Certificates and Disclosure of the Fund's Interest. The
Custodian is hereby authorized to execute on behalf of the Fund ownership
certificates, affidavits or other disclosure required under Applicable Law or
established market practice in connection with the receipt of income, capital
gains or other payments by the Fund with respect to Investments, or in
connection with the sale, purchase or ownership of Investments.
With respect to securities issued in the United States of America, the
Custodian [ ] may [ ] may not release the identity of the Fund to an
issuer which requests such information pursuant to the Shareholder
Communications Act of 1985 for the specific purpose of direct
communications between such issuer and the Fund. IF NO BOX IS CHECKED,
THE CUSTODIAN SHALL RELEASE SUCH INFORMATION UNTIL IT RECEIVES CONTRARY
INSTRUCTIONS FROM THE FUND. With respect to securities issued outside of
the United States of America, information shall be released in accordance
with law or custom of the particular country in which such security is
located.
6.12 Proxy Materials. The Custodian shall deliver, or cause to be
delivered, to the Fund proxy forms, notices of meeting, and any other notices
or announcements materially affecting or relating to Investments received by
the Custodian or any nominee.
6.13 Taxes. The Custodian shall, where applicable, assist the Fund in the
reclamation of taxes withheld on dividends and interest payments received by
the Fund. 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 otherwise act as directed by
Instruction, including without limitation effecting the free payments of
moneys or the free delivery of securities, provided that such Instruction
shall indicate the purpose of such payment or delivery and that the Custodian
shall record the party to whom such payment or delivery is made.
The Custodian shall attend to all nondiscretionary details in connection
with the sale or purchase or other administration of Investments, except as
otherwise directed by an Instruction, and may make payments to itself or
others for minor expenses of administering Investments under this Agreement;
provided that the Fund shall have the right to request an accounting with
respect to such expenses.
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In fulfilling the duties set forth in Sections 6.6 through 6.10 above,
the Custodian shall provide to the Fund all material information pertaining to
a corporate action which the Custodian actually receives; provided that the
Custodian shall not be responsible for the completeness or accuracy of such
information. Any advance credit of cash or shares expected to be received as a
result of any corporate action shall be subject to actual collection and may,
when the Custodian deems collection unlikely, be reversed by the Custodian.
The Custodian may at any time or times in its discretion appoint (and may
at any time remove) agents (other than Subcustodians) to carry out some or all
of the administrative provisions of this Agreement ("Agents"), provided,
however, that the appointment of such agent shall not relieve the Custodian of
its administrative obligations under this Agreement.
7. Cash Accounts, Deposits and Money Movements. Subject to the terms and
conditions set forth in this Section 7, the Fund hereby authorizes the
Custodian to open and maintain, with itself or with Subcustodians, cash
accounts in United States Dollars, in such other currencies as are the
currencies of the countries in which the Fund maintains Investments or in such
other currencies as the Fund shall from time to time request by Instruction.
7.1 Types of Cash Accounts. Cash accounts opened on the books of the
Custodian ("Principal Accounts") shall he 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.
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. Unless
otherwise specifically agreed in writing by the Custodian or any Subcustodian,
all deposits shall be payable only at the branch of the Custodian or
Subcustodian where the deposit is made or carried.
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, which may delay or
affect the transferability, convertibility or availability of any currency in
the country (a) in which such Principal or Agency Accounts are maintained or
(b) in which such currency is issued, and in no event shall the Custodian be
obligated to make payment of a
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deposit denominated in a currency during the period during which its
transferability, convertibility or availability has been affected by any such
law, regulation or event. Without limiting the generality of the foregoing,
neither the Custodian nor any Subcustodian shall be required to repay any
deposit made at a foreign branch of either the Custodian or Subcustodian if
such branch cannot repay the deposit due to a cause for which the Custodian
would not be responsible in accordance with the terms of Section 9 of this
Agreement unless the Custodian or such Subcustodian expressly agrees in
writing to repay the deposit under such circumstances. All currency
transactions in any account opened pursuant to this Agreement are subject to
exchange control regulations of the United States and of the country where
such currency is the lawful currency or where the account is maintained. Any
taxes, costs, charges or fees imposed on the convertibility of a currency held
by the Fund shall be for the account of the Fund.
7.4 Foreign Exchange Transactions. The Custodian shall, subject to the
terms of this Section, settle foreign exchange transactions (including
contracts, futures, options and options on futures) on behalf and for the
account of the Fund with such currency brokers or banking institutions,
including Subcustodians, as the Fund may direct pursuant 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.
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
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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.
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 shall not be liable for delays in carrying out
such Instructions to transfer cash which are not due to the Custodian's own
negligence or willful misconduct.
7.6 Advances. If, for any reason in the conduct of its safekeeping duties
pursuant to Section 5 hereof or its administration of the Fund's assets
pursuant to Section 6 hereof, the Custodian or any Subcustodian advances
monies to facilitate settlement or otherwise for benefit of the Fund (whether
or not any Principal or Agency Account shall be overdrawn either during, or at
the end of, any Business Day), the Fund hereby does:
7.6.1 acknowledge that the Fund shall have no right or title to any
Investments purchased with such Advance save a right to receive such
Investments upon: (a) the debit of the Principal or Agency Account; or,
(b) if such debit would produce an overdraft in such account, other
reimbursement of the associated Advance;
7.6.2 grant to the Custodian a security interest in all Investments;
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 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 utilize the available cash
balance in any Agency or Principal Account and to dispose of any Investments
to the extent necessary to recover payment of all principal of, and interest
on, such Advance in full. The Custodian may assign any rights it has hereunder
to a Subcustodian or third party. Any security interest in Investments taken
hereunder shall be treated as financial assets credited to securities accounts
under Articles 8 and 9 of the Uniform Commercial Code (1997). Accordingly, the
10
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.
8. Subcustodians and Securities Depositories. Subject to the provisions
hereinafter set forth in this Section 8, the Fund hereby authorizes the
Custodian to utilize Securities Depositories to act on behalf of the Fund and
to appoint from time to time and to utilize Subcustodians. With respect to
securities and funds held by a Subcustodian, either directly or indirectly
(including by a Securities Depository or Clearing Corporation),
notwithstanding any provisions of this Agreement to the contrary, payment for
securities purchased and delivery of securities sold may be made prior to
receipt of securities or payment, respectively, and securities or payment may
be received in a form, in accordance with (a) governmental regulations, (b)
rules of Securities Depositories and clearing agencies, (c) generally accepted
trade practice in the applicable local market, (d) the terms and
characteristics of the particular Investment, or (e) the terms of
Instructions.
8.1 Domestic Subcustodians and Securities Depositories. The Custodian may
deposit and/or maintain, either directly or through one or more agents
appointed by the Custodian, Investments of the Fund in any Securities
Depository in the 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 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
11
the 1940 Act and the rules and regulations thereunder, to act on behalf of the
Fund as a Subcustodian for purposes of holding Investments of the Fund outside
the United States. Such appointment of foreign Subcustodians shall be subject
to approval of the Fund in accordance with Subsections 8.2.1 and 8.2.2 hereof,
and use of non-U.S. Securities Depositories shall be subject to the terms of
Subsections 8.2.3 and 8.2.4 hereof. An Instruction to open an account in a
given country shall comprise authorization of the Custodian to hold assets in
such country in accordance with the terms of this Agreement. The Custodian
shall not be required to make independent inquiry as to the authorization of
the Fund to invest in such country.
8.2.1 Board Approval of Foreign Subcustodians. Unless and except to
the extent that the Board has delegated to and the Custodian has accepted
delegation of review of certain matters concerning the appointment of
Subcustodians pursuant to Subsection 8.2.2, the Custodian shall, prior to
the appointment of any Subcustodian for purposes of holding Investments
of the Fund outside the United States, obtain written confirmation of the
approval of the Board of Trustees or Directors of the Fund with respect
to (a) the identity of a Subcustodian, and (b) the Subcustodian agreement
which shall govern such appointment, such approval to be signed by an
Authorized Person.
8.2.2 Delegation of Board Review of Subcustodians. From time to
time, the Custodian may agree to perform certain reviews of Subcustodians
and of Subcustodian Contracts as delegate of the Fund's Board. In such
event, the Custodian's duties and obligations with respect to this
delegated review will be performed in accordance with the terms of the
attached 17f-5 Delegation Schedule to this Agreement.
8.2.3 Monitoring and Risk Assessment of Securities Depositories.
Prior to the placement of any assets of the Fund with a non-U.S.
Securities Depository, the Custodian: (a) shall provide to the Fund or
its authorized representative an assessment of the custody risks
associated with maintaining assets within such Securities Depository; and
(b) shall have established a system to monitor the custody risks
associated with maintaining assets with such Securities Depository on a
continuing basis and to promptly notify the Fund or its Investment
Adviser of any material changes in such risk. In performing its duties
under this subsection, the Custodian shall use reasonable care and may
rely on such reasonable sources of information as may be available
including but not limited to: (i) published ratings; (ii) information
supplied by a Subcustodian that is a participant in such Securities
Depository; (iii) industry surveys or publications; (iv) information
supplied by the depository itself, by its auditors (internal or external)
or by the relevant Foreign Financial Regulatory Authority. It is
acknowledged that information procured through some or all of these
sources may not be independently verifiable by the Custodian and that
direct access to Securities Depositories is limited under most
circumstances. Accordingly, the Custodian shall not be responsible for
errors or omissions in its duties hereunder provided that it has
performed its monitoring and assessment duties with reasonable care. The
risk assessment shall be provided to the Fund or its Investment Advisor
by such means as the Custodian shall reasonably establish. Advices of
material change in such assessment may be provided by the Custodian in
the manner established as customary between the Fund and the Custodian
for transmission of material market information.
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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 Advisor the
depository information customarily provided and shall promptly inform the
Fund or its Investment Advisor 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. With respect to securities and
funds held by a Subcustodian, either directly or indirectly (including by a
Foreign Depository, Securities System or foreign clearing agency), including
demand deposit and interest bearing deposits, currencies or other deposits and
foreign exchange contracts as referred to herein, the Custodian shall be
liable to the Fund if and only to the extent that such Subcustodian is liable
to the Custodian and the Custodian recovers under the applicable subcustodian
agreement.
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 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.
9. Responsibility of the Custodian. In performing its duties and obligations
hereunder, the Custodian shall use reasonable care under the facts and
circumstances prevailing in the market where performance is effected, Subject
to the specific provisions of this Section, the Custodian shall be liable for
any direct damage incurred by the Fund in consequence of the Custodian's
negligence, bad faith or willful misconduct. In no event shall the Custodian
be liable hereunder for any special, indirect, punitive or consequential
damages arising out of, pursuant to or in connection with this Agreement even
if the Custodian has been advised of the possibility of such damages. It is
agreed that the Custodian shall have no duty to assess the risks inherent in
the Fund's Investments or to provide investment advice with respect to such
Investments and that the Fund as principal shall bear any risks attendant to
particular Investments such as failure of counterparty or issuer.
9.1 Limitations of Performance. The Custodian shall not be responsible
under this Agreement for any failure to perform its duties, and shall not
liable hereunder for any loss or damage in association with such failure to
perform, for or in consequence of the following causes:
13
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.
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 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
(c) any other economic or political risk incurred or experienced.
9.2 Limitations on Liability. The Custodian shall not be liable for
any loss, claim, damage or other liability arising from the following
causes:
9.2.1 Failure of Third Parties. The failure of any third party
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,
14
option, derivative or commodities contract; (c) failure of an Investment
Advisor, Foreign Custody Manager or other agent of the Fund; or (d)
failure of other third parties similarly beyond the control or choice of
the Custodian.
9.2.2 Information Sources. The Custodian may rely upon information
received from issuers of Investments or agents of such issuers,
information received from Subcustodians and from other commercially
reasonable sources such as commercial data bases and the like, but shall
not be responsible for specific inaccuracies in such information,
provided that the Custodian has relied upon such information in good
faith, or for the failure of any commercially reasonable information
provider.
9.2.3 Reliance on Instruction. Action by the Custodian or the
Subcustodian in accordance with an Instruction, even when such action
conflicts with, or is contrary to any provision of, the Funds 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.
10. Indemnification. The Fund hereby indemnifies the Custodian and each
Subcustodian, and their respective agents, nominees and the partners,
employees, officers and directors, and agrees to hold each of them harmless
from and against all claims and liabilities, including counsel fees and taxes,
incurred or assessed against any of them in connection with the performance of
this Agreement and any Instruction. If a Subcustodian or any other person
indemnified under the preceding sentence, gives written notice of claim to the
Custodian, the Custodian shall promptly give written notice to the Fund. Not
more than thirty days following the date of such notice, unless the Custodian
shall be liable under Section 8 hereof in respect of such claim, the Fund will
pay the amount of such claim or reimburse the Custodian for any payment made
by the Custodian in respect thereof.
11. Reports and Records. The Custodian shall:
11.1 create and maintain records relating to the performance of its
obligations under this Agreement;
11.2 make available to the Fund, its auditors, agents and employees,
during regular business hours of the Custodian, upon reasonable request 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.
The Fund shall examine all records, howsoever produced or transmitted,
promptly upon receipt thereof and notify the Custodian promptly of any
discrepancy or error therein. Unless the Fund delivers written notice of any
such discrepancy or error within a reasonable time after its
15
receipt thereof, such records shall be deemed to be true and accurate. It is
understood that the Custodian now obtains and will in the future obtain
information on the value of assets from outside sources which may be utilized
in certain reports made available to the Fund. The Custodian deems such
sources to be reliable but it is acknowledged and agreed that the Custodian
does not verify nor represent nor warrant as to the accuracy or completeness
of such information and accordingly shall be without liability in selecting
and using such sources and furnishing such information.
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.
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.
12.4 GOVERNING LAW AND JURISDICTION. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND BE GOVERNED BY THE LAWS OF, THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW OF SUCH STATE. THE PARTIES
HERETO IRREVOCABLY CONSENT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK AND THE FEDERAL COURTS LOCATED IN NEW YORK CITY IN THE
BOROUGH OF MANHATTAN.
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:
16
If to the Fund:
Japan Smaller Capitalization Fund, Inc.
Nomura Asset Management U.S.A. Inc
000 Xxxxxx Xxxx 00xx Xxxxx
Xxx Xxxx XX 00000-0000
Attn: Xxxx Xxxxxxx, Senior Vice President
Telephone: [ ]
Facsimile: [ ]
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. In fulfilling its duties hereunder, the Custodian shall be
entitled to receive and act upon the advice of (i) counsel regularly retained
by the Custodian in respect of
17
such matters, (ii) counsel for the Fund or (iii) such counsel as the Fund and
the Custodian may agree upon, with respect to all matters, and the Custodian
shall be without liability for any action reasonably taken or omitted pursuant
to such advice.
12.10 Conflict. Nothing contained in this Agreement shall prevent the
Custodian and its associates from (i) dealing as a principal or an
intermediary in the sale, purchase or loan of the Fund's Investments to, or
from the Custodian or its associates; (ii) acting as a custodian, a
subcustodian, a trustee, an agent, securities dealer, an investment manager or
in any other capacity for any other client whose interests may be adverse to
the interest of the Fund; or (iii) buying, holding, lending, and dealing in
any way in any assets for the benefit of its own account, or for the account
of any other client whose interests may be adverse to the Fund notwithstanding
that the same or similar assets may be held or dealt in by or for the account
of the Fund by the Custodian. The Fund hereby voluntarily consents to, and
waives any potential conflict of interest between the Custodian and/or its
associates and the Fund, and agrees that:
(a) the Custodian's and/or its associates' engagement in any such
transaction shall not disqualify the Custodian from continuing
to perform as the custodian of the Fund under this Agreement;
(b) the Custodian and/or its associates shall not be under any duty
to disclose any information in connection with any such
transaction to the Fund;
(c) the Custodian and/or its associates shall not be liable to
account to the Fund for any profits or benefits made or derived
by or in connection with any such transaction; and
(d) the Fund shall use all reasonable efforts to disclose this
provision, among other provisions in this Agreement, to its
shareholders.
13. Definitions. The following defined terms will have the respective meanings
set forth below.
13.1 "Advance" shall mean any extension of credit by or through the
Custodian or by or through any Subcustodian and shall include amounts paid to
third parties for account of the Fund or in discharge of any expense, tax or
other item payable by the Fund.
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.
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.
18
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" shall mean any entity or system established
for purposes of providing securities settlement and movement and associated
functions for a given market.
13.8 "Delegation Agreement" shall mean any separate agreement entered
into between the Custodian and the Fund or its authorized representative with
respect to certain matters concerning the appointment and administration of
Subcustodians delegated to the Custodian pursuant to Rule 17f-5.
13.9 "Foreign Custody Manager" shall mean the Fund's foreign custody
manager appointed pursuant to Rule 17f-5 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 "Funds Transfer Services Schedule" shall mean any separate schedule
entered into between the Custodian and the Bank or its authorized
representative with respect to certain matters concerning the processing of
payment orders from Principal Accounts of the Bank.
13.12 "Instruction(s)" shall have the meaning assigned in Section 4.
13.13 "Investment Advisor" shall mean any person or entity who is an
Authorized Person to give Instructions with respect to the investment and
reinvestment of the Fund's Investments.
13.14 "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.
13.15 "Margin Account" shall have the meaning set forth in Section 6.4
hereof.
13.16 "Principal Account(s)" shall mean deposit accounts of the Fund
carried on the books of BBH&Co. as principal in accordance with Section 7.
13.17 "Safekeeping Account" shall mean an account established on the
books of the Custodian or any Subcustodian for purposes of segregating the
interests of the Fund (or clients of the Custodian or Subcustodian) from the
assets of the Custodian or any Subcustodian.
13.18 "Securities Depository" shall mean a central or book entry system
or agency established under Applicable Law for purposes of recording the
ownership and/or entitlement to investment securities for a given market that,
if a foreign Securities Depository, meets the definitional requirements of
Rule 17f-7 under the 1940 Act.
19
13.19 "Subcustodian(s)" shall mean each foreign bank appointed by the
Custodian pursuant to Section 8, but shall not include Securities
Depositories.
13.20 "Tri-Party Agreement" shall have the meaning set forth in Section
6.4 hereof.
13.21 "1940 Act" shall mean the Investment Company Act of 1940.
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 (75) consecutive
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. If no Instruction has been given as of the
effective date of termination, Custodian may at any time on or after such
termination date and upon ten (10) consecutive calendar days written notice to
the Fund either (a) deliver the Investments of the Fund held hereunder to the
Fund at the address designated for receipt of notices hereunder; or (b)
deliver any investments held hereunder to a bank or trust company having a
capitalization of $2,000,000 USD equivalent and operating under the Applicable
law of the jurisdiction where such Investments arc located, such delivery to
be at the risk of the Fund. In the event that Investments or moneys of the
Fund remain in the custody of the Custodian or its Subcustodians after the
date of termination owing to the failure of the Fund to issue Instructions
with respect to their disposition or owing to the fact that such disposition
could not be accomplished in accordance with such Instructions despite
diligent efforts of the Custodian, the Custodian shall be entitled to
compensation for its services with respect to such Investments and moneys
during such period as the Custodian or its Subcustodians retain possession of
such items and the provisions of this Agreement shall remain in full force and
effect until disposition in accordance with this Section is accomplished.
20
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. JAPAN SMALLER CAPITALIZATION
FUND, INC.
By: /s/ Xxxxxxx X. Xxxxxx By: /s/ Xxxxx X. Xxxxxxxx
---------------------------------- ---------------------------------
Name: Xxxxxxx X. Xxxxxx Name: Xxxxx X. Xxxxxxxx
Title: Partner Title: Vice President
Date: April 23, 2002 Date: April 26, 2002
21
