CUSTODIAN CONTRACT
between
H&Q HEALTHCARE INVESTORS
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held By It ............ 1
2. Duties of the Custodian with Respect to Property of
the Fund Held by the Custodian in the United States............... 2
2.1 Holding Securities ...................................... 2
2.2 Delivery of Securities .................................. 2
2.3 Registration of Securities .............................. 3
2.4 Bank Accounts ........................................... 3
2.5 Investment and Availability of Federal Funds ............ 4
2.6 Collection of Income .................................... 4
2.7 Payment of Fund Moneys .................................. 4
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased .................................. 5
2.9 Appointment of Agents ................................... 5
2.10 Deposit of Securities in Securities System .............. 5
2.11 Segregated Account ...................................... 6
2.12 Ownership Certificates for Tax Purposes ................. 7
2.13 Proxies ................................................. 7
2.14 Communications Relating to Fund Portfolio Securities .... 7
2.15 Reports to Fund by Independent Public Accountants ....... 7
2.16 Unauthorized Payments ................................... 7
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States ....................... 7
3.1 Appointment of Foreign Sub-Custodians ................... 7
3.2 Assets to be Held ....................................... 8
3.3 Foreign Securities Depositories ......................... 8
3.4 Segregation of Securities ............................... 8
3.5 Agreements with Foreign Banking Institutions ............ 8
3.6 Access of Independent Accountants of the Fund ........... 8
3.7 Reports by Custodian .................................... 8
3.8 Transactions in Foreign Custody Account ................. 9
3.9 Liability of Foreign Sub-Custodians ..................... 9
3.10 Monitoring Responsibilities ............................. 9
3.11 Branches of U.S. Banks .................................. 9
4. Proper Instructions .............................................. 10
5. Actions Permitted Without Express Authority ...................... 10
6. Evidence of Authority ............................................ 10
7. Duties of Custodian with Respect to the Books of
Account and Calculations of Net Asset Value and
Net Income ...................................................... 10
8. Records ......................................................... 11
9. Opinion of Fund's Independent Accountant;
Accountants Reports ............................................. 11
10. Compensation of Custodian ....................................... 11
11. Responsibility of Custodian ..................................... 11
12. Effective Period, Termination and Amendment ..................... 12
13. Successor Custodian ............................................. 13
14. Interpretive and Additional Provisions .......................... 13
15. Massachusetts Law to Apply ...................................... 13
16. Prior Contracts ................................................. 14
CUSTODIAN CONTRACT
This Contract between H&Q Healthcare Investors, a Massachusetts
business trust organized and existing under the laws of Massachusetts, having
its principal place of business at 00 Xxxxx Xxxxx, Xxxxxx Xxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000-0000, hereinafter called the "Fund", and State Street Bank
and Trust Company, a Massachusetts corporation, having its principal place of
business at 000 Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx, 00000, hereinafter
called the "Custodian",
WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of its assets,
including securities it desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Declaration of
Trust. The Fund agrees to deliver to the Custodian all securities and cash owned
by it, and all payments of income, payments of principal or capital
distributions received by it with respect to all securities owned by the Fund
from time to time, and the cash consideration received by it for such new or
treasury shares of beneficial interest, $.01 par value ("Shares"), of the Fund
as may be issued or sold from time to time. The Custodian shall not be
responsible for any property of the Fund held or received by the Fund and not
delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article
4), the Custodian shall from time to time employ one or more sub-custodians
located in the United States, but only in accordance with an applicable vote by
the Board of Trustees of the Fund, and provided that the Custodian shall have no
more or less responsibility or liability to the Fund on account of any actions
or omissions of any sub-custodian so employed than any such sub-custodian has to
the Custodian. The Custodian may employ as sub-custodians for the Fund's
securities and other
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assets the foreign banking institutions and foreign securities depositories
designated in Schedule "A" hereto but only in accordance with the provisions of
Article 3.
2. Duties of the Custodian with Respect to Property of the Fund Held By
the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and physically
segregate for the account of the Fund all non-cash property, to
be held by it in the United States, including all domestic
securities owned by the Fund, other than securities which are
maintained pursuant to Section 2.10 in a clearing agency which
acts as a securities depository or in a book-entry system
authorized by the U.S. Department of the Treasury, collectively
referred to herein as "Securities System."
2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by the Fund held by the Custodian or
in a Securities System account of the Custodian only upon
receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, and only in
the following cases:
1) Upon sale of such securities for the account of the Fund
and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered
into by the Fund;
3) In the case of a sale effected through a Securities
System, in accordance with the provisions of Section 2.10
hereof;
4) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;
5) To the issuer thereof or its agent when such securities
are called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Fund or into the name of any nominee or
nominees of the Custodian or into the name or nominee name
of any agent appointed pursuant to Section 2.9 or into the
name or nominee name of any sub-custodian appointed
pursuant to Article 1; or for exchange for a different
number of bonds, certificates or other evidence
representing the same aggregate face amount or number of
units; provided that, in any such case, the new securities
are to be delivered to the Custodian;
7) To the broker selling the same for examination in
accordance with the "street delivery" custom;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts
or temporary securities for definitive securities;
provided that, in any such case, the new securities and
cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities
made by the Fund, but only against receipt of adequate
collateral as agreed upon from time to time by the
Custodian and the Fund, which may be in the form of cash
or obligations issued by the United States government, its
agencies or instrumentalities, except that in connection
with any loans for which collateral is to be credited to
the Custodian's account in the book-entry system
authorized by the U.S.
2
Department of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities owned
by the Fund prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings
by the Fund requiring a pledge of assets by the Fund, but
only against receipt of amounts borrowed except that in
cases where additional collateral is required to secure a
borrowing already made, and such fact is made to appear in
Proper Instructions from the Fund to the Custodian,
further securities may be released for that purpose
without any such payment; and similarly upon receipt of
such Proper Instructions, the Custodian shall repay any
such loan upon redelivery to it of the securities pledged
or hypothecated therefor and upon surrender of documents
evidencing the loan;
12) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian and a
broker-dealer registered under the Securities Exchange Act
of 1934 (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating
to compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange, or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, and a Futures
Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations,
regarding account deposits in connection with transactions
by the Fund;
14) For any other proper trust purpose, but only upon receipt
of, in addition to Proper Instructions, a certified copy
of a resolution of the Board of Trustees or of the
Executive Committee signed by an officer of the Fund and
certified by the Secretary or an Assistant Secretary,
specifying the securities to be delivered, setting forth
the purpose for which such delivery is to be made,
declaring such purpose to be a proper trust purpose, and
naming the person or persons to whom delivery of such
securities shall be made.
2.3 Registration of Securities. Domestic securities held by the
Custodian (other than bearer securities) shall be registered in
the name of the Fund or in the name of any nominee of the Fund
or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Fund, unless the Fund has authorized
in writing the appointment of a nominee to be used in common
with other registered investment companies having the same
investment adviser as the Fund, or in the name or nominee name
of any agent appointed pursuant to Section 2.9 or in the name or
nominee name of any sub-custodian appointed pursuant to Article
1. All securities accepted by the Custodian on behalf of the
Fund under the terms of this Contract shall be in "street name"
or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate
bank account or accounts in the United States in the name of the
Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such
account or accounts, subject to the provisions hereof, all cash
received by it from or for the account of the Fund, other than
cash maintained by the Fund in a bank account established and
used in accordance with Rule 17f-3 under the Investment Company
Act of 1940. Funds held by the Custodian for the Fund may be
deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or
desirable; provided, however, that every such bank or trust
company shall be qualified to act as
3
a custodian under the Investment Company Act of 1940 and that
each such bank or trust company and the funds to be deposited
with each such bank or trust company shall be approved by vote
of a majority of the Board of Trustees of the Fund. Such funds
shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in
that capacity.
2.5 Availability of Federal Funds. The Custodian shall, upon the
receipt of Proper Instructions, make federal funds available to
the Fund as of specified times agreed upon from time to time by
the Fund and the Custodian in the amount of checks received in
payment for Shares of the Fund which are deposited into the
Fund's account.
2.6 Collection of Income. The Custodian shall collect on a timely
basis all income and other payments with respect to United
States registered securities held hereunder to which the Fund
shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all
income and other payments with respect to United States bearer
securities if, on the date of payment by the issuer, such
securities are held by the Custodian or its agent thereof and
shall credit such income, as collected, to the Fund's custodial
account. Without limiting the generality of the foregoing, the
Custodian shall detach and present for payment all coupons and
other income items requiring presentation as and when they
become due and shall collect interest when due on securities
held hereunder. Income due the Fund on United States securities
loaned pursuant to the provisions of Section 2.2 (10) shall be
the responsibility of the Fund. The Custodian will have no duty
or responsibility in connection therewith, other than to provide
the Fund with such information or data as may be necessary to
assist the Fund in arranging for the timely delivery to the
Custodian of the income to which the Fund is properly entitled.
2.7 Payment of Fund Moneys. Upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out moneys of the Fund in
the following cases only:
1) Upon the purchase of domestic securities, futures
contracts or options on futures contracts for the account
of the Fund but only (a) against the delivery of such
securities, or evidence of title to futures contracts or
options on futures contracts, to the Custodian (or any
bank, banking firm or trust company doing business in the
United States or abroad which is qualified under the
Investment Company Act of 1940, as amended, to act as a
custodian and has been designated by the Custodian as its
agent for this purpose) registered in the name of the Fund
or in the name of a nominee of the Custodian referred to
in Section 2.3 hereof or in proper form for transfer; (b)
in the case of a purchase effected through a Securities
System, in accordance with the conditions set forth in
Section 2.10 hereof (c) in the case of repurchase
agreements entered into between the Fund and the
Custodian, or another bank, or a broker-dealer which is a
member of NASD, (i) against delivery of the securities
either in certificate form or through an entry crediting
the Custodian's account at the Federal Reserve Bank with
such securities (ii) against delivery of the receipt
evidencing purchase by the Fund of securities owned by the
Custodian along with written evidence of the agreement by
the Custodian to repurchase such securities from the Fund
or (d) in the case of investments in companies that do not
issue certificates, the delivery to the Custodian of other
evidence of ownership, or investments in securities that
require payment to an escrow account pending closing of
the purchase, deposit to such escrow against future
delivery of such securities;
4
2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2
hereof;
3) For the payment of any expense or liability incurred by
the Fund, including but not limited to the following
payments for the account of the Fund: interest, taxes,
management, accounting, transfer agent and legal fees, and
operating expenses of the Fund whether or not such
expenses are to be in whole or part capitalized or treated
as deferred expenses;
4) For the payment of any dividends declared pursuant to the
governing documents of the Fund;
5) For payment of the amount of dividends received in respect
of securities sold short;
6) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a
resolution of the Board of Trustees or of the Executive
Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring
such purpose to be a proper purpose, and naming the person
or persons to whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for purchase of
domestic securities for the account of the Fund is made by the
Custodian in advance of receipt of the securities purchased in
the absence of specific written instructions from the Fund to so
pay in advance, the Custodian shall be absolutely liable to the
Fund for such securities to the same extent as if the securities
had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in
its discretion appoint (and may at any time remove) any other
bank or trust company which is itself qualified under the
Investment Company Act of 1940, as amended, to act as a
custodian, as its agent to carry out such of the provisions of
this Article 2 as the Custodian may from time to time direct;
provided, however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities
hereunder nor permit it to delegate substantially all of its
duties.
2.10 Deposit of Securities in Securities Systems. The Custodian may
deposit and/or maintain domestic securities, owned by the Fund
in a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of
1934, which acts as a securities depository, or in the
book-entry system authorized by the U.S. Department of the
Treasury and certain federal agencies, collectively referred to
herein as "Securities System", in accordance-with applicable
Federal Reserve Board and Securities and Exchange Commission
rules and regulations, if any, and subject to the following
provisions:
1) The Custodian may keep domestic securities of the Fund in
a Securities System provided that such securities are
represented in an account ("Account") of the Custodian in
the Securities System which shall not include any assets
of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
2) The records of the Custodian with respect to domestic
securities of the Fund which are maintained in a
Securities System shall identify by book-entry those
securities belonging to the Fund;
3) The Custodian shall pay for domestic securities purchased
for the account of the Fund upon (i) receipt of advice
from the Securities System that such securities have been
transferred to the Account, and (ii) the making of an
entry on the
5
records of the Custodian to reflect such payment and
transfer for the account of the Fund. The Custodian shall
transfer domestic securities sold for the account of the
Fund upon (i) receipt of advice from the Securities System
that payment for such securities has been transferred to
the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer and
payment for the account of the Fund. Copies of all advices
from the Securities System of transfers of domestic
securities for the account of the Fund shall identify the
Fund, be maintained for the Fund by the Custodian and be
provided to the Fund at its request. Upon request, the
Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund in the form of
a written advice or notice and shall furnish to the Fund
copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of
the Fund;
4) The Custodian shall provide the Fund with any report
obtained by the Custodian on the Securities System's
accounting system, internal accounting control and
procedures for safeguarding domestic securities deposited
in the Securities System;
5) The Custodian shall have received the initial or annual
certificate, as the case may be, required by Article 12
hereof;
6) Anything to the contrary in this Contract notwithstanding,
the Custodian shall be liable to the Fund for any loss or
damage to the Fund resulting from use of the Securities
System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or of any
of its or their employees or from failure of the Custodian
or any such agent to enforce effectively such rights as it
may have against the Securities System; at the election of
the Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claim against
the Securities System or any other person which the
Custodian may have as a consequence of any such loss or
damage if and to the extent that the Fund has not been
made whole for any such loss or damage.
2.11 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or
accounts for and on behalf of the Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Section 2.10 hereof, (i) in accordance with the provisions of
any agreement among the Fund, the Custodian and a broker-dealer
registered under the Exchange Act and a member of the NASD (or
any futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading Commission
or any registered contract market), or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund, (ii)
for purposes of segregating cash or government securities in
connection with options purchased, sold or written by the Fund
or commodity futures contracts or options thereon purchased or
sold by the Fund, (iii) for the purposes of compliance by the
Fund with the procedures required by Investment Company Act
Release No. 10666, or any subsequent release or releases of the
Securities and Exchange Commission relating to the maintenance
of segregated accounts by registered investment companies and
(iv) for other proper trust purposes, but only, in the case of
clause (iv), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the Board of
Trustees or of the Executive Committee signed by an officer of
the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such
segregated account and declaring such purposes to be proper
trust purposes.
6
2.12 Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of
income or other payments with respect to domestic securities of
the Fund held by it and in connection with transfers of such
securities.
2.13 Proxies. The Custodian shall, with respect to the domestic
securities held hereunder, cause to be promptly executed by the
registered holder of such securities, if the securities are
registered otherwise than in the name of the Fund or a nominee
of the Fund, all proxies, without indication of the manner in
which such proxies are to be voted, and shall promptly deliver
to the Fund such proxies, all proxy soliciting materials and all
notices relating to such securities.
2.14 Communications Relating to Fund Portfolio Securities. The
Custodian shall transmit promptly to the Fund all written
information (including, without limitation, pendency of calls
and maturities of domestic securities and expirations of rights
in connection therewith and notices of exercise of call and put
options written by the Fund and the maturity of futures
contracts purchased or sold by the Fund) received by the
Custodian from issuers of the domestic securities being held for
the Fund. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Fund all written
information received by the Custodian from issuers of the
domestic securities whose tender or exchange is sought and from
the party (or his agents) making the tender or exchange offer.
If the Fund desires to take action with respect to any tender
offer, exchange offer or any other similar transaction, the Fund
shall notify the Custodian at least three business days prior to
the date on which the Custodian is to take such action.
2.15 Reports to Fund by Independent Public Accountants. The Custodian
shall provide the Fund, at such times as the Fund may reasonably
require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures
for safeguarding securities, futures contracts and options on
futures contracts, including domestic securities deposited
and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such
reports shall be of sufficient scope and in sufficient detail,
as may reasonably be required by the Fund, to provide reasonable
assurance that any material inadequacies would be disclosed by
such examination, and, if there are no such inadequacies, the
reports shall so state.
2.16 Unauthorized Payments. The Custodian shall not deliver to any
trustee, officer or employee of the Fund any portfolio
securities or cash of the Fund which it holds as Custodian. This
provision shall not be deemed to apply to dividend payments or
proceeds of redemption or repurchase of the Fund shares held by
him in any capacity to such trustee, officer or employee in his
capacity as shareholder nor to payments made as compensation or
as reimbursement for expenses incurred on behalf of the Fund.
3. Duties of the Custodian with Respect to Property of the Fund Held
Outside of the United States
3.1 Appointment of Foreign Sub-Custodians. The Custodian is
authorized and instructed to employ as sub-custodians for the
Fund's securities and other assets maintained outside of the
United States the foreign banking institutions and foreign
securities depositories designated on Schedule A
hereto ("foreign sub-custodians"). Upon receipt of "Proper
Instructions", together with a certified resolution of the
Fund's Board of Trustees, the Custodian and the Fund may agree
to amend Schedule A
7
hereto from time to time to designate additional foreign banking
institutions and foreign securities depositories to act as
sub-custodians. Upon receipt of Proper Instructions from the Fund
the Custodian shall cease the employment of any one or more of
such sub-custodians for maintaining custody of the Fund's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and
other assets maintained in the custody of the foreign
sub-custodians to: (a) "foreign securities", as defined in
paragraph (c)(1) of Rule 17f-5 under the Investment Company Act
of 1940, and (b) cash and cash equivalents in such amounts as
the Custodian or the Fund may determine to be reasonably
necessary to effect the Fund's foreign securities transactions.
3.3 Foreign Securities Depositories. Except as may otherwise be
agreed upon in writing by the Custodian and the Fund, assets of
the Fund shall be maintained in foreign securities depositories
only through arrangements implemented by the foreign banking
institutions serving as sub-custodians pursuant to the terms
hereof.
3.4 Segregation of Securities. The Custodian shall identify on its
books as belonging to the Fund, the foreign securities of the
Fund held by each foreign sub-custodian. Each agreement pursuant
to which the Custodian employs a foreign banking institution
shall require that such institution establish a custody account
for the Custodian on behalf of the Fund and physically segregate
in that account securities and other assets of the Fund, and, in
the event that such institution deposits the Fund's securities
in a foreign securities depository, that it shall identify on
its books as belonging to the Custodian, as agent for the Fund,
the securities so deposited (all collectively referred to as the
"Account").
3.5 Agreements with Foreign Banking Institutions. Each agreement
with a foreign banking institution shall be substantially in the
form set forth in Exhibit 1 hereto and shall provide that: (a)
the Fund's assets will not be subject to any right, charge,
security interest, lien or claim of any kind in favor of the
foreign banking institution or its creditors, except a claim of
payment for their safe custody or administration; (b) beneficial
ownership for the Fund's assets will be freely transferable
without the payment of money or value other than for custody or
administration; (c) adequate records will be maintained
identifying the assets as belonging to the Fund; (d) officers of
or auditors employed by, or other representatives of the
Custodian, including to the extent permitted under applicable
law the independent public accountants for the Fund, will be
given access to the books and records of the foreign banking
institution relating to its actions under its agreement with the
Custodian; and (e) assets of the Fund held by the foreign
sub-custodian will be subject only to the instructions of the
Custodian or its agents.
3.6 Access of Independent Accountants of the Fund. Upon request of
the Fund, the Custodian will use its best efforts to arrange for
the independent accountants of the Fund to be afforded access to
the books and records of any foreign banking institution
employed as a foreign sub-custodian insofar as such books and
records relate to the performance of such foreign banking
institutions under its agreement with the Custodian.
3.7 Reports by Custodian. The Custodian will supply to the Fund from
time to time, as mutually agreed upon, statements in respect of
the securities and other assets of the Fund held by foreign
sub-custodians, including but not limited to an identification
of entities having possession of the Fund's securities and other
assets and advices or notifications of any transfers of
securities to or from each custodial account
8
maintained by a foreign banking institution for the Custodian on
behalf of the Fund indicating, as to securities acquired for the
Fund, the identity of the entity having physical possession of
such securities.
3.8 Transactions in Foreign Custody Account.
(a) Upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the
parties, the Custodian shall make or cause its foreign
sub-custodian to transfer, exchange or deliver foreign
securities owned by the Fund, but except to the extent
explicitly provided herein only in any of the cases
specified in Section 2.2.
(b) Upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the
parties the Custodian shall pay out or cause its foreign
sub-custodians to pay out monies of the Fund, but except
to the extent explicitly provided herein only in any of
the cases specified in Section 2.7.
(c) Notwithstanding any provision of this Contract to the
contrary, settlement and payment for securities received
for the account of the Fund and delivery of securities
maintained for the account of the Fund may be effected in
accordance with the customary or established securities
trading or securities processing practices and procedures
in the jurisdiction or market in which the transaction
occurs, including, without limitation, delivering
securities to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer)
against a receipt with the expectation of receiving later
payment for such securities from such purchaser or dealer.
(d) Securities maintained in the custody of a foreign
sub-custodian may be maintained in the name of such
entity's nominee to the same extent as set forth in
Section 2.3 of this Contract and the Fund agrees to hold
any such nominee harmless from any liability as a holder
of record of such securities.
3.9 Liability of Foreign Sub-Custodians. Each agreement pursuant to
which the Custodian employs a foreign banking institution as a
foreign sub-custodian shall require the institution to exercise
reasonable care in the performance of its duties and to
indemnify, and hold harmless, the Custodian and Fund from and
against any loss, damage, cost, expense, liability or claim
arising out of or in connection with the institution's
performance of such obligations. At the election of the Fund, it
shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a foreign banking
institution as a consequence of any such loss, damage, cost,
expense, liability or claim if and to the extent that the Fund
has not been made whole for any such loss, damage, cost,
expense, liability or claim.
3.10 Monitoring Responsibilities. The Custodian shall furnish
annually to the Fund, during the month of June, information
concerning the foreign sub-custodians employed by the Custodian.
Such information shall be similar in kind and scope to that
furnished to the Fund in connection with the initial approval of
this Contract. In addition, the Custodian will promptly inform
the Fund in the event that the Custodian learns of a material
adverse change in the financial condition of a foreign
sub-custodian or is notified by a foreign banking institution
employed as a foreign sub-custodian that there appears to be a
substantial likelihood that its shareholders' equity will
decline below $200 million (U.S. dollars or the equivalent
thereof) or that its shareholders' equity has declined below
$200 million (in each case computed in accordance with generally
accepted U.S. accounting principles).
3.11 Branches of U.S. Banks. Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the
custody of the Fund assets is maintained in a foreign branch of
a banking institution which is a "bank" as defined by Section
9
2(a)(5) of the Investment Company Act of 1940 which meets the
qualification set forth in Section 26(a) of said Act. The
appointment of any such branch as a sub-custodian shall be
governed by Article I of this Contract.
4. Proper Instructions
Proper Instructions as used herein means a writing signed or initialed
by one or more person or persons as the Board of Trustees shall have from time
to time authorized. Each such writing shall set forth the specific transaction
or type of transaction involved, including a specific statement of the purpose
for which such action is requested. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have been given by a
person authorized to give such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to be confirmed in writing.
Upon receipt of a certificate of the Secretary or an Assistant Secretary as to
the authorization by the Board of Trustees of the Fund accompanied by a detailed
description of procedures approved by the Board of Trustees, Proper Instructions
may include communications effected directly between electromechanical or
electronic devices provided that the Board of Trustees and the Custodian are
satisfied that such procedures afford adequate safeguards for the Fund's assets.
5. Actions Permitted without Express Authority
The Custodian may in its discretion, without express authority from the
Fund:
1) make payments to itself or others for minor expenses not to
exceed $500 per quarter of handling securities or other similar
items relating to its duties under this Contract, provided that
all such payments shall be accounted for to the Fund;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks, drafts
and other negotiable instruments; and
4) In general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property of
the Fund except as otherwise directed by the Board of Trustees
of the Fund.
6. Evidence of Authority
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper reasonably
believed by it in good faith to be genuine and to have been properly executed by
or on behalf of the Fund or its Investment Adviser. The Custodian may receive
and accept a certified copy of a vote of the Board of Trustees of the Fund as
conclusive evidence (a) of the authority of any person to act in accordance with
such vote or (b) of any determination or of any action by the Board of Trustees
pursuant to the Declaration of Trust as described in such vote, and such vote
may be considered as in full force and effect until receipt by the Custodian of
written notice to the contrary.
7. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Trustees of the Fund to keep
the books of account of the Fund and/or compute the net asset value per share of
the outstanding shares of the Fund or, if directed in writing to do so by the
Fund, shall itself keep such books of account and/or compute such net asset
value per share. The Custodian shall also calculate weekly and at the last
business day of each month the net income of the Fund as described in the Fund's
currently effective prospectus and
10
shall advise the Fund and the Transfer Agent weekly of the total amounts of such
net income and, if instructed in writing by an officer of the Fund to do so,
shall advise the Transfer Agent periodically of the division of such net income
among its various components. The calculations of the net asset value per share
and the weekly and month-end income of the Fund shall be made at the time or
times described from time to time in the Fund's currently effective prospectus.
8. Records
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 3la-1 and 3la-2 thereunder,
applicable federal and state tax laws and any other law or administrative rules
or procedures which may be applicable to the Fund. All such records shall be the
property of the Fund and shall at all times during the regular business hours of
the Custodian be open for inspection by duly authorized officers, employees or
agents of the Fund and employees and agents of the Securities and Exchange
Commission. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by the Fund and held by the Custodian and shall,
when requested to do so by the Fund and for such compensation as shall be agreed
upon between the Fund and the Custodian, include certificate numbers in such
tabulations.
9. Opinion of Fund's Independent Accountant; Accountants Reports
The Custodian shall take all reasonable action, as the Fund may from
time to time request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund's Form N-2, and Form N-SAR or other
annual reports to the Securities and Exchange Commission and with respect to any
other requirements of such Commission.
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent accountants with regard to its
own, or with regard to its agent's through which securities are deposited with a
Securities System, accounting system, internal accounting control and procedures
for safeguarding securities, including securities deposited and/or maintained in
a Securities System, relating to the services provided by the Custodian under
this Agreement; such reports shall be of sufficient scope and in sufficient
detail, as may reasonably be required by the Fund, to provide reasonable
assurance that any material inadequacies would be disclosed by such examination,
and, if there are no such inadequacies, shall so state.
10. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund and the Custodian.
11. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties.
The Custodian shall be held to the exercise of reasonable care in carrying out
the provisions of this Contract, but shall be kept indemnified by and shall be
without liability to the Fund for any action taken or omitted by it in good
faith without negligence. It shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Fund) on all matters, and shall be
without liability for any action reasonably taken or omitted pursuant to such
advice.
11
It is understood that if in any case the Fund may be asked to indemnify
or save the Custodian harmless, the Fund shall be fully and promptly advised of
all pertinent facts concerning the situation in question, and it is further
understood that the Custodian will indemnify and notify the Fund promptly
concerning any situation which presents or appears likely to present the
probability of such a claim for indemnification against the Fund. In the event
of the Custodian's failure to advise the Fund as required above, however, the
Custodian shall lose its right to indemnification hereunder only to the extent
that the Fund's interests are actually prejudiced thereby. The Fund shall have
the option to defend the Custodian against any claim which may be the subject of
this indemnification, and in the event that the Fund so elects it will so notify
the Custodian, and thereupon the Fund shall take over complete defense of the
claim, and the Custodian shall in such situations initiate no further legal or
other expenses for which it shall seek indemnification under this Article 11.
The Custodian shall in no case confess any claim or make any compromise in any
case in which the Fund will be asked to indemnify the Custodian except with the
Fund's prior written consent.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United States and, regardless of whether assets are maintained in
the custody of a foreign banking institution, a foreign securities depository or
a branch of a U.S. bank as contemplated by paragraph 3.11 hereof, the Custodian
shall not be liable for any loss, damage, cost, expense, liability or claim
resulting from, or caused by, the direction of or authorization by the Fund to
maintain custody or any securities or cash of the Fund in a foreign country
including, but not limited to, losses resulting from nationalization,
expropriation, currency restrictions, or acts of war or terrorism.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian to advance cash or securities for
any purpose or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund shall be
security therefor and should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of the Fund
assets to the extent necessary to obtain reimbursement.
12. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however that the Custodian shall not act under Section 2.10 hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Trustees of the Fund have approved the initial use
of a particular Securities System and the receipt of an annual certificate of
the Secretary or an Assistant Secretary that the Board of Trustees have reviewed
the use by the Fund of such Securities System, as required in each case by Rule
17f-4 under the Investment Company Act of 1940, as amended; provided further,
however, that the Fund shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations, or any provision
of the Declaration of Trust, and further provided, that the Fund may at any time
by action of its Board of Trustees (i) substitute another bank or trust company
for the Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the
12
happening of a like event at the direction of an appropriate regulatory agency
or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.
13. Successor Custodian
If a successor custodian shall be appointed by the Board of Trustees of
the Fund, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer, all securities then held by it or its agents hereunder and shall
transfer to an account of the successor custodian all of the Fund's securities
held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Trustees of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian and all instruments held by the Custodian
relative thereto and all other property held by it under this Contract and to
transfer to an account of such successor custodian all of the Fund's securities
held in any Securities System. Thereafter, such bank or trust company shall be
the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
14. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and
the Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Declaration of Trust of the Fund. No interpretive or additional provisions
made as provided in the preceding sentence shall be deemed to be an amendment of
this Contract.
15. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
13
16. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund and the Custodian relating to the custody of
the Fund's assets.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly authorized
representative and its seal to be hereunder affixed as of the 21st day of April,
1987.
ATTEST H&Q HEALTHCARE INVESTORS
/s/ Xxxxxxxxx X. Xxxxxxx By /s/ Xxxx X. Xxxx
------------------------ -------------------------------
Assistant Secretary President
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ X.X. Xxxxx By /s/ Xxxxxxxx X. Xxxxxx
------------------------ -------------------------------
Assistant Secretary Vice President
14
Schedule A
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Trustees of H&Q Healthcare
Investors for use as sub-custodians for the Fund's securities and other assets:
[insert banks and securities depositories]
Exhibit 1
CUSTODIAN AGREEMENT
To:
Gentlemen:
The undersigned ("State Street") hereby requests that you (the "Bank")
establish a custody account and a cash account for each custodian/employee
benefit plan identified in the Schedule attached to this Agreement and each
additional account which is identified to this Agreement. Each such custody or
cash account as applicable will be referred to herein as the "Account" and will
be subject to the followings terms and conditions:
1. The Bank shall hold as agent for State Street and shall physically
segregate in the Account such cash, bullion, coin, stocks, shares,
bonds, debentures, notes and other securities and other property which
is delivered to the Bank for that State Street Account (the
"Property").
2. a. Without the prior approval of State Street it will not deposit
securities in any securities depository or utilize a clearing
agency, incorporated or organized under the laws of a country
other than the United States, unless such depository or clearing
house operates the central system for handling of securities or
equivalent book-entries in that country or operates a
transnational system for the central handling of securities or
equivalent book-entries;
b. When securities held for an Account are deposited in a securities
depository or clearing agency by the Bank, the Bank shall
identify on its books as belonging to State Street as agent for
such Account, the securities so deposited.
3. The Bank represents that either:
a. It currently has stockholders' equity in excess of $200 million
(U.S. dollars or the equivalent of U.S. dollars computed in
accordance with generally accepted U.S. accounting principles)
and will promptly inform State Street in the event that there
appears to be a substantial likelihood that its stockholders'
equity will decline below $200 million, or in any event, at such
time as its stockholders' equity in fact declines below $200
million; or
b. It is the subject of an exemptive order issued by the United
States Securities and Exchange Commission, which such order
permits State Street to employ the Bank as a sub-custodian,
notwithstanding the fact that the Bank's stockholders' equity is
currently below $200 million or may in the future decline below
$200 million due to currency fluctuation.
4. Upon the written instructions of State Street, as permitted by
Paragraph 8, the Bank is authorized to pay cash from the Account and
to sell, assign, transfer, deliver or exchange, or to purchase for the
Account, any and all stocks, shares, bonds, debentures, notes and
other securities ("Securities"), bullion, coin and any other property,
but only as provided in such written instructions. The Bank shall not
be
held liable for any act or omission to act on instructions
given or purported to be given should there be any error in
such instructions.
5. Unless the Bank receives written instructions of State Street
to the contrary, the Bank is authorized:
a. To promptly receive and collect all income and principal
with respect to the Property and to credit cash receipts
to the Account;
b. To promptly exchange securities where the exchange is
purely ministerial (including, without limitation, the
exchange of temporary securities for those in definitive
form and the exchange of warrants, or other documents of
entitlement to securities, for the securities themselves);
c. To promptly surrender securities at maturity or when
called or redemption upon receiving payment therefor;
d. Whenever notification of a rights entitlement or a
fractional interest resulting from a rights issue, stock
dividend or stock split is received for the Account and
such rights entitlement or fractional interest bears an
expiration date, the Bank will endeavor to obtain State
Street Bank's instructions, but should these not be
received in time for the Bank to take timely action, the
Bank is authorized to sell such rights entitlement or
fractional interest and to credit the Account;
e. To hold registered in the name of the nominee of the Bank
or its agents such Securities as are ordinarily held in
registered form;
f. To execute in State Street's name for the Account,
whenever the Bank deems it appropriate, such ownership and
other certificates as may be required to obtain the
payment of income from the Property; and
g. To pay or cause to be paid, from the Account any and all
taxes and levies in the nature of taxes imposed on such
assets by any governmental authority and shall use
reasonable efforts, to promptly reclaim any foreign
withholding tax relating to the Account.
6. If the Bank shall receive any proxies, notices, reports or
other communications relative to any of the Securities of the
Account in connection with tender offers, reorganization,
mergers, consolidations, or similar events which may have an
impact upon the issuer thereof, the Bank shall promptly
transmit any such communication to State Street Bank by means
as will permit State Street Bank to take timely action with
respect thereto.
7. The Bank is authorized in its discretion to appoint brokers
and agents in connection with the Bank's handling of
transactions relating to the Property provided that any such
appointment shall not relieve the Bank of any of its
responsibilities or liabilities hereunder.
8. Written instructions shall include (i) instructions in writing
signed by such persons as are designated in writing by State
Street; (ii) telex or tested telex instructions of State
Street; (iii) other forms of instruction in computer readable
form as shall be customarily utilized for the transmission of
like information; and (iv) such other forms of communication
as from time to time shall be agreed upon by State Street and
the Bank.
9. The Bank shall supply periodic reports with respect to the
safekeeping of assets held by it under this agreement. The
content of such reports shall include but not be limited to
any transfer to or from any account held by the Bank hereunder
and such other information as State Street may reasonably
request.
10. In addition to its obligations under Section 2B hereof, the
Bank shall maintain such other records as may be necessary to
identify the assets hereunder as belonging to each
custodian/employee benefit plan identified in our Schedule
attached to this agreement and each additional account which
is identified to this agreement.
11. The Bank agrees that its books and records relating to its
actions under this Agreement shall be opened to the physical,
on-premises inspection and audit at reasonable times by
officers of, auditors employed by or other representatives
of State Street (including to the extent permitted under
____________________________ law the independent public
accountants for any entity whose Property is being held
hereunder) and shall be retained for such period as shall be
agreed by State Street and the Bank.
12. The Bank shall be entitled to reasonable compensation for its
services and expenses as custodian under this Agreement, as
agreed upon from time to time by the Bank and State Street.
13. The Bank shall exercise reasonable care in the performance of
its duties, as are set forth or contemplated herein or
contained in instructions given to the Bank which are not
contrary to this Agreement, shall maintain adequate insurance
and agrees to indemnify and hold harmless, State Street and
each Account from and against a loss, damage, cost, expense,
liability or claim arising out of or in connection with the
Bank's performance of its obligations hereunder.
14. The bank agrees (i) the Property held hereunder is not subject
to any right, charge, security interest, lien or claim of any
kind in favor of the Bank or any of its agents or its
creditors except a claim of payment for their safe custody and
administration and (ii) the beneficial ownership of the
Property shall be freely transferable without the payment of
money or other value other than for safe custody or
administration.
15. The Bank agrees to meet State Street Operating Requirements
(See Exhibit A).
16. This Agreement may be terminated by the Bank or State Street
by 60 days' written notice to the other, sent by registered
mail or express courier. The Bank, upon the date this
Agreement terminates pursuant to notice which has been given
in a timely fashion, shall deliver the Property to the
beneficial owner unless the Bank has received from the
beneficial owner 60 days, prior to the date on which this
Agreement is to be terminated written instructions of State
Street specifying the name(s) of the person(s) to whom the
Property shall be delivered.
17. The Bank and State Street shall each use its best efforts to
maintain the confidentiality of the Property in each Account,
subject, however, to the provisions of any laws requiring the
disclosure of the Property.
18. Unless otherwise specified in this Agreement, all notices with
respect to matters contemplated by this Agreement shall be
deemed duly given when received in writing or by confirmed
telex by the Bank or State Street at their respective
addresses set forth below, or at such other address as be
specified in each case in a notice similarly given:
To State Street Master Trust Division, Global Custody
STATE STREET BANK AND TRUST COMPANY
X.X. Xxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000
X.X.X.
To the Bank
19. This Agreement shall be governed by and construed in
accordance with the laws of ______________________________
except to the extent that such laws are preempted by the laws
of the United States of America.
Please acknowledge your agreement to the foregoing by executing a copy
of this letter.
Very truly yours,
STATE STREET BANK AND TRUST COMPANY
By: ______________________________
Vice President
Date: ____________________________
Agreed to by:
By: _________________________________
Date: _______________________________
STATE STREET BANK AND TRUST COMPANY
Custodian Fee Schedule
I. Administration
A. Custody Service - Maintain custody of fund assets. Settle
portfolio purchases and sales. Report buy and sell fails.
Determine and collect portfolio income. Make cash disbursements
and report cash transactions.
B. Custody and Portfolio Accounting Service - Maintain custody of
fund assets. Settle portfolio purchases and sales. Report buy and
sell fails. Determine and collect portfolio income. Make cash
disbursements and report cash transactions. Maintain investment
ledgers, provide selected portfolio transaction, position and
income reports.
C. Custody, Portfolio and Fund Accounting Service - Maintain custody
of fund assets. Settle portfolio purchases and sales. Report buy
and sell fails. Determine and collect portfolio income. Make cash
disbursements and report cash transactions. Maintain investment
ledgers, provide selected portfolio transactions, position and
income reports. Maintain general ledger and capital stock
accounts. Prepare daily trial balance. Calculate net asset value
daily. Provide selected general ledger reports. Securities yield
or market value quotation will be provided to State Street by the
fund.
The administration fee shown below is an annual charge, billed and
payable monthly, based on average monthly net assets.
ANNUAL FEES PER PORTFOLIO
B. Custody and C. Custody, Portfolio
Fund Net Assets A. Custody Portfolio Acct. & Fund Accounting
First $20 million 1/ 30 of 1% 1/ 20 of 1% 1/ 15 of 1%
Next $80 million 1/ 60 of 1% 1/ 40 of 1% 1/ 30 of 1%
Excess 1/100 of 1% 1/100 of 1% 1/100 of 1%
Minimum Monthly
Charges $1,500 $2,000 $2,500
II. Global Custody
Services provided include: Cash Movements, Foreign Communication,
Foreign Exchange (local currency settlements).
Fund Net Assets (global only) Annual Fees
First $50 million 18 Basis Points
Next $50 million 15 Basis Points
Over $100 million 12 Basis Points
Minimum Per Client $5,000.00 Annually
III. Portfolio Trades - For each line item processed
State Street Bank Repos $7.00
DTC or Fed Book Entry $12.00
New York Physical Settlements $25.00
All other trades $16.00
IV. Options
Option charge for each option written or
closing contract, per issue, per broker $25.00
Option expiration charge, per issue, per broker $15.00
Option exercised charge, per issue, per broker $15.00
V. Lending of Securities
Deliver loaned securities versus cash
collateral $20.00
Deliver loaned securities versus
securities collateral $30.00
Receive/deliver additional cash collateral $6.00
Substitutions of securities collateral $30.00
Deliver cash collateral versus receipt of
loaned securities $15.00
Deliver securities collateral versus receipt
of loaned securities $25.00
Loan administration -- xxxx-to-market
per day, per loan $3.00
VI. Interest Rate Futures
Transactions -- no security movement $8.00
VII. Coupon Bonds
Monitoring for calls and processing coupons --
for each coupon issue held -- monthly charge $5.00
VIII. Holdings Charge
For each issue maintained -- monthly charge $5.00
IX. Paydown of Government Securities
Per paydown $10.00
X. Dividend Charges
For items held at the Request of Traders
over record date in street form $50.00
XI. Special Services
Fees for activities of a non-recurring nature such as fund
consolidations or reorganizations, extraordinary security shipments and
the preparation of special reports will be subject to negotiation.
Fees for tax accounting/recordkeeping for options, financial futures,
and other special items will be negotiated separately.
XII. Out-of-Pocket Expenses
A billing for the recovery of applicable out-of-pocket expenses will be
made as of the end of each month. Out-of-pocket expenses include, but
are not limited to the following:
Telephone
Wire Charges ($5.25 per wire in and $5.00 out)
Postage and Insurance
Courier Service
Duplicating
Legal Fees
Supplies Related to Fund Records
Rush Transfer -- $8.00 Each
Transfer Fees
Sub-custodian Charges
Price Waterhouse Audit Letter
Federal Reserve Fee for Return Check items over $2,500 --$4.25
GNMA Transfer -- $l5.00 each
XIII. Payment
The above fees will be charged against the fund's custodian checking
account five (5) days after the invoice is mailed to the fund's
offices.
AMENDMENT
The Custodian Contract dated April 21, 1987, as amended, between H&Q
Healthcare Investors (the "Fund") and State Street Bank and Trust Company (the
"Custodian") is hereby further amended as follows:
I. Section 2.1 is amended to read as follows:
"Holding Securities. The Custodian shall hold and physically segregate
for the account of the Fund all non-cash property, including all
securities owned by the Fund, other than (a) securities which are
maintained pursuant to Section 2.10 in a clearing agency which acts as
a securities depository or in a book-entry system authorized by the
U.S. Department of the Treasury, collectively referred to herein as
"Securities System" and (b) commercial paper of an issuer for which
State Street Bank and Trust Company acts as issuing and paying agent
("Direct Paper") which is deposited and/or maintained in the Direct
Paper System of the Custodian pursuant to Section 2.10.A."
II. Section 2.2 is amended to read, in relevant part as follows:
"Delivery of Securities. The Custodian shall release and deliver
securities owned by the Fund held by the Custodian or in a Securities
System account of the Custodian or in the Custodian's Direct Paper book
entry system account ("Direct Paper System Account") only upon receipt
of Proper Instructions, which may be continuing instructions when
deemed appropriate by the parties, and only in the following cases:"
III. Section 2.2 4) through 13) are renumbers 5) through 14) and the
following is added as subparagraph 4):
"4) In the case of a sale effected through the Direct Paper
System, in accordance with the provisions of Section 2.10.A
hereof."
IV. Section 2.7(l) is amended to read in relevant part as follows:
"Payment and Fund Monies. Upon receipt of Proper Instructions, which
may be continuing instructions when deemed appropriate by the parties,
the Custodian shall pay out monies of the Fund in the following cases
only:
1) Upon the purchase of securities, options, futures contracts or
options on futures contracts for the account of the Fund but
only (a) against the delivery of such securities or evidence
of title to such options, futures contracts or options on
futures contracts, to the Custodian (or any bank, banking firm
or trust company doing business in the United States or abroad
which is qualified under the Investment Company Act of 1940,
as amended, to act as a custodian and has been designated by
the Custodian as its agent for this purpose) registered in the
name of the Fund or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a
Securities System, in accordance with the conditions set forth
in Section 2.10 hereof or (c) in the case of a purchase
involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.10.A; or (d) in the case of
repurchase agreements entered into between the Fund and the
Custodian, or another bank, or a broker-
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dealer which is a member of NASD, (i) against delivery of the
securities either in certificate form or through an entry
crediting the Custodian's account at the Federal Reserve Bank
with such securities or (ii) in the case of purchase by the
Fund of securities owned by State Street Bank and Trust
Company ("State Street") for its own account, against (A)
delivery of the receipt evidencing purchase by the Fund, (B)
earmarking certificates for such securities to show ownership
by the Fund or transfer of such securities from State Street's
proprietary account at the Federal Reserve Bank to its account
described in (i) above, unless the securities are already held
in the latter account, (C) the entry on the records of State
Street showing that such securities are held by the Fund, and
(D) delivery of written evidence of the agreement of State
Street to repurchase such securities from the Fund; provided
that, upon receipt of Proper Instructions, the Custodian shall
transfer to another bank or trust company qualified to act as
a custodian under the Investment Company Act of 1940, as
amended, securities held in a Securities System and purchased
from State Street subject to State Street's agreement to
repurchase such securities; or (e) in the case of investments
in companies that do not issue certificates, the delivery to
the Custodian of other evidence of ownership, or investments
in securities that require payment to an escrow account
pending closing of the purchase, deposit to such escrow
against future delivery of such securities;"
V. Following Section 2.10, there is inserted a new Section 2.10.A to read
as follows:
2.10.A "Fund Assets Held in the Custodian's Direct Paper System.
The Custodian may deposit and/or maintain securities owned
by the Fund for which the Custodian acts as issuing and
paying agent for the direct issue of commercial paper by and
for issuers through the Custodian's book-entry system,
referred to herein as the "Direct Paper System," subject to
the following provisions:
1) No transaction relating to securities in the Direct
Paper System will be effected in the absence of
Proper Instructions;
2) The Custodian may keep securities of the Fund in
the Direct Paper System only if such securities are
represented in an account ("Account") of the
Custodian in the Direct Paper System which shall
not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise
for customers;
3) The records of the Custodian with respect to
securities of the Fund which are maintained in the
Direct Paper System shall identify by book-entry
those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased
for the account of the Fund upon the making of an
entry on the records of the Custodian to reflect
such payment and transfer of securities to the
account of the Fund. The Custodian shall transfer
securities sold for the account of the Fund upon
the making of an entry on the records of the
Custodian to reflect such transfer and receipt of
payment for the account of the Fund;
5) The Custodian shall furnish the Fund confirmation
of each transfer to or from the account of the
Fund, in the form of a written advice or notice, of
Direct Paper on the next business day following
such transfer and shall furnish to the Fund copies
of daily transaction sheets reflecting each day's
transaction in the Direct Paper System for the
account of the Fund;
6) The Custodian shall provide the Fund with any
report on its system of internal accounting control
as the Fund may reasonably request from time to
time."
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VI. Section 12 is hereby amended to read as follows:
"Effective Period, Termination and Amendment. This Contract shall
become effective as of its execution, shall continue in full force and
effect until terminated as hereinafter provided, may be amended at any
time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage
prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing;
provided, however that the Custodian shall not act under Section 2.10
hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Directors of the
Fund has approved the initial use of a particular Securities System and
the receipt of an annual certificate of the Secretary or an Assistant
Secretary that the Board of Directors has reviewed the use by the Fund
of such Securities System, as required in each case by Rule 17f-4 under
the Investment Company Act of 1940, as amended and that the Custodian
shall not act under Section 2.10.A hereof in the absence of receipt of
an initial certificate of the Secretary or an Assistant Secretary that
the Board of Directors has approved the initial use of the Direct Paper
System and the receipt of an annual certificate of the Secretary or an
Assistant Secretary that the Board of Directors has reviewed the use by
the Fund of the Direct Paper System; provided further, however, that
the Fund shall not amend or terminate this Contract in contravention of
any applicable federal or state regulations, or any provision of the
Declaration of Trust, and further provided, that the Fund may at any
time by action of its Board of Trustees (i) substitute another bank or
trust company for the Custodian by giving notice as described above to
the Custodian, or (ii) immediately terminate this Contract in the event
of the appointment of a conservator or receiver for the Custodian by
the Comptroller of the Currency, the Federal Deposit Insurance
Corporation or the Commissioner of Banks for the Commonwealth of
Massachusetts or upon the happening of a like event at the direction of
an appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and
shall likewise reimburse the Custodian for its costs, expenses and
disbursements."
Except as otherwise expressly amended and modified herein, the
provisions of the Custodian Contract shall remain in full force and effect.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to be executed in its name and on its behalf by its duly authorized
representatives and its Seal to be hereto affixed as of the 21st day of July,
1989.
ATTEST H&Q HEALTHCARE INVESTORS
/s/ Xxxxxxxxx X. Xxxxxxx By /s/ Xxxx X. Xxxx
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Assistant Secretary President
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ By /s/
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Assistant Secretary Vice President
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