FORM OF AMENDED AND RESTATED CUSTODY AGREEMENT
THIS AGREEMENT is made as of the [ ] day of [ ] by and between
The Bank of New York, a New York corporation authorized to do a banking business
("Custodian"), and Nations Funds Trust, a Delaware business trust (the "Trust").
W I T N E S S E T H
WHEREAS, the Trust is a registered open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, by a Custody Agreement made as of the 14th day of
February, 2000 (the "Original Custody Agreement") the Trust retained Custodian
to serve as custodian for the Trust, on behalf of its portfolios listed on
Schedule I (individually a "Fund" and collectively the "Funds") and to provide
the services described therein, and Custodian agreed to serve and to provide
such services; and
WHEREAS, the Trust and Custodian desire to amend and restate
the Original Custody Agreement in a single agreement (hereinafter the
"Agreement");
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the Trust and Custodian hereby agree as follows:
1. Appointment. The Trust hereby appoints Custodian to act as custodian of its
portfolio securities, cash and other property on the terms set forth in this
Agreement. Custodian accepts such appointment and agrees to furnish the services
herein set forth in return for the compensation as provided in Paragraph 23
hereof. Custodian agrees to comply with all relevant provisions of the 1940 Act
and applicable rules and regulations thereunder.
The Trust may from time to time issue separate series or classes, and
classify and reclassify shares of any such series or class. The Trust shall
promptly specify to Custodian in writing such series or classes, or any
reclassification and thereafter Custodian shall identify to each such series or
class Property, as hereinafter defined, belonging to such series or class, and
such reports, confirmations and notices to the Trust as are called for under
this Agreement shall identify the series or class to which such report,
confirmation or notice pertains.
2. Delivery of Documents. The Trust has furnished Custodian with copies
properly certified or authenticated of each of the following:
(a) votes of the Trust's Board of Trustees authorizing the appointment of
Custodian as custodian of portfolio securities, cash and other property
of the Trust, respectively, and approving and consenting to this
Agreement;
(b) schedules identifying and containing the signatures of all of the
Trust's officers and any other persons authorized to issue Oral
Instructions and to sign Written Instructions, as hereinafter defined,
on behalf of the Funds of the Trust;
(c) the Trust's current registration statement on Form N-1A (the
"Registration Statement") under the Securities Act of 1933, as amended
(the "1933 Act"), and under the 1940 Act (File Nos. 333-89661 and
811-09645), as filed with the Securities and Exchange Commission (the
"SEC"), relating to the Funds' shares of beneficial interest, without
par value (the "Shares");
(d) the current prospectus(es) and statement(s) of additional information of
each of the Funds, including all amendments and supplements thereto
(collectively the "Prospectuses"); and
(e) a copy of the opinion of counsel for the Trust, filed with the SEC as
part of the Trust's current Registration Statement.
The Trust will furnish Custodian from time to time with
copies, properly certified or authenticated, of all amendments of or supplements
to any of the foregoing, if any.
3. Definitions.
(a) "Authorized Person". As used in this Agreement, the term
"Authorized Person" means any of the Trust's officers, and any other person,
whether or not any such person is an officer or employee of the Trust, duly
authorized by the Board of Trustees of the Trust to give Oral and Written
Instructions to Custodian on behalf of the Trust and listed on a schedule
provided to Custodian pursuant to Section 2 of this Agreement. Authorized
Persons duly authorized by the Board of Trustees of the Trust to buy and sell
foreign currency on a spot and forward basis and options to buy and sell foreign
currency are denoted by an asterisk thereon.
(b) "Book-Entry System". As used in this Agreement, the term
"Book-Entry System" means the Federal Reserve/Treasury book-entry system for
United States and federal agency securities, its successor or successors and its
nominee or nominees and any book-entry system maintained by a clearing agency
registered with the SEC under Section 17A of the Securities Exchange Act of 1934
(the "1934 Act").
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(c) "Composite Currency Unit". Shall mean the European Currency Unit
or any other composite unit consisting of the aggregate of specified amounts of
specified Currencies as such unit may be constituted from time to time.
(d) "Currency". Shall mean money denominated in a lawful currency of
any country or the European Currency Unit.
(e) "FX Transaction". Shall mean any transaction for the purchase by
one party of an agreed amount in one Currency against the sale by it to the
other party of an agreed amount in another Currency.
(f) "Instructions". Shall mean instruction communications transmitted
by appropriately safeguarded (whether by password protection or other means)
electronic or telecommunications media including but not limited to S.W.I.F.T.,
LASER, computer-to-computer interface, dedicated transmission line and tested
telex.
(g) "Oral Instructions". As used in this Agreement, the term "Oral
Instructions" means oral instructions actually received by Custodian from an
Authorized Person or from a person reasonably believed by Custodian to be an
Authorized Person.
(h) "Officer's Certificate". The term "Officer's Certificate" as used
in this Agreement means instructions delivered by hand, mail, tested telegram,
cable, telex, or facsimile sending device, and actually received by Custodian
signed or reasonably believed by Custodian to be signed by two officers of the
Trust listed on a schedule provided to Custodian pursuant to Section 2 of this
Agreement.
(i) "Property". The term "Property", as used in this Agreement, means:
(i) any and all securities and other property of the Trust which
the Trust may from time to time deliver to Custodian, as applicable, or which
Custodian may from time to time hold for the Trust;
(ii) all income in respect of any securities or other property
described in immediately preceding clause (i);
(iii) all proceeds of sales of any of such securities or other
property described in preceding clause (i) actually received by Custodian; and
(iv) proceeds of the sale of Shares received by Custodian from
time to time from or on behalf of the Trust.
(j) "Securities Depository". As used in this Agreement, the term
"Securities Depository" shall not include any Eligible Securities Depository as
defined in Paragraph 27B hereof and shall mean The Depository Trust Company, a
clearing agency registered with the SEC or its successor or successors and its
nominee or nominees; and
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shall also mean any other registered clearing agency, its successor or
successors specifically identified in a certified copy of a vote of the Trust's
Board of Trustees approving deposits by Custodian therein.
(k) "Written Instructions". As used in this Agreement, "Written
Instructions" means instructions delivered by hand, mail, tested telegram,
cable, telex, or facsimile sending device, and actually received by Custodian,
signed or reasonably believed by Custodian to be signed by an appropriate number
of Authorized Person(s), and the term Written Instructions shall also include
Instructions, except that Instructions need not be signed or reasonably believed
to be signed by any Authorized Person(s) where such Instructions are transmitted
by Software pursuant to Paragraph 26A. A fax receipt or comparable confirmation
of transmission of any Written Instructions shall be deemed evidence of actual
receipt by Custodian.
4. Delivery and Registration of the Property. The Trust shall deliver or
cause to be delivered to Custodian all securities and all monies owned by the
Funds, including cash received for the issuance of Shares, at any time during
the period of this Agreement, except for securities and monies to be delivered
to any sub-custodian appointed, with approval of the Trust, by Custodian
pursuant to Paragraphs 7, 27, or 28(g) hereof. Custodian will not be responsible
for such securities and such monies until actually received by it. All
securities delivered to Custodian or any such sub-custodian (other than in
bearer form) shall be registered in the name of the Fund or in the name of a
nominee of a Fund or in the name of Custodian or any nominee of Custodian (with
or without indication of fiduciary status) or in the name of any sub-custodian
or any nominee of such sub-custodian appointed, with approval of the Trust,
pursuant to Paragraphs 7, 27, or 28(g) hereof or shall be properly endorsed and
in form for transfer satisfactory to Custodian.
5. Voting and Other Rights. With respect to all securities, however
registered, it is understood that the voting and other rights and powers shall
be exercised by the Trust. Custodian's only duty with respect to such rights
shall be to mail to the Trust within two (2) business days following receipt by
Custodian any documents received by Custodian as custodian, including notices of
corporate action, proxies, proxy soliciting materials and offering circulars,
with any elections or proxies for securities registered in a nominee name
executed by such nominee. In addition, Custodian shall provide notice of
Custodian's receipt of such documents by electronic means (e.g., posting notice
on LASER), as agreed between the parties. Where warrants, options, tenders or
other securities have fixed expiration dates, the Trust understands that in
order for Custodian to act, Custodian must receive the Trust's instructions at
its offices in New York, addressed as Custodian may from time to time request,
by no later than noon (New York City time) at least one (1) business day prior
to the last scheduled date to act with respect thereto (or such earlier date or
time as Custodian may reasonably notify the Trust). Absent Custodian's timely
receipt of such instructions, such instructions will expire without liability to
Custodian. Custodian shall have no duty to forward to the Trust any annual,
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quarterly or special reports issued by companies whose securities are held by
Custodian hereunder.
6. Receipt and Disbursement of Money.
(a) Custodian shall open and maintain a custody account for each Fund
of the Trust, subject only to draft or order by Custodian acting pursuant to the
terms of this Agreement, and, subject to Paragraphs 7, 27, or 28(g) hereof,
shall hold in such account, subject to the provisions hereof, all cash received
by it from or for the Funds. Custodian shall make payments of cash to, or for
the account of, each Fund from such cash only: (i) for the purchase of
securities for the Funds as provided in Paragraph 14 hereof; (ii) upon receipt
of an Officer's Certificate for the payment of dividends or other distributions
on or with respect to Shares, or for the payment of interest, taxes,
administration, distribution or advisory fees or expenses which are to be borne
by the Funds under the terms of this Agreement and, with respect to each Fund,
and under the terms of any investment advisory agreements, administration
agreements or distribution agreements; (iii) upon receipt of Written
Instructions for payments in connection with the conversion, exchange or
surrender of securities owned or subscribed to by the Funds and held by or to be
delivered to Custodian; (iv) to a sub-custodian pursuant to Paragraphs 7, 27, or
28(g) hereof; (v) for the redemption of Shares; or (vi) upon receipt of an
Officer's Certificate for other corporate purposes.
(b) Custodian is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received as Custodian for the
Funds.
7. Receipt of Securities.
(a) Except as provided by Paragraphs 7(c), 8, 27, or 28(g) hereof, and
except as otherwise directed by Oral or Written Instructions described in
Paragraph 11 hereof, Custodian shall hold and physically segregate in a separate
account with respect to each Fund, identifiable from those of any other person,
all securities and non-cash property received by it for the Funds. All such
securities and non-cash property are to be held or disposed of by Custodian for
each Fund pursuant to the terms of this Agreement. In the absence of Written
Instructions accompanied by a certified vote authorizing the specific
transaction by the Trust's Board of Trustees, and subject to Paragraph 25
hereof, Custodian shall have no power or authority to withdraw, deliver, assign,
hypothecate, pledge or otherwise dispose of any such securities and investments,
except in accordance with the express terms provided for in this Agreement. In
no case may any Trustee, officer, employee or agent of the Trust withdraw any
securities. In connection with its duties under this Paragraph 7(a), Custodian
may enter into sub-custodian agreements with other banks or trust companies for
the receipt of certain securities and cash to be held by Custodian for the
account of a Fund pursuant to this Agreement, provided Custodian obtains the
prior written approval of the Trust to any such sub-custody arrangement.
Custodian will provide the Trust with a copy of each sub-custodian agreement it
executes pursuant to this Paragraph 7(a). Custodian shall be liable for acts or
omissions of any
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such sub-custodian selected by it pursuant to this Paragraph 7(a), under the
standards of care provided for herein, except for any such sub-custodian engaged
at the specific direction of the Funds. Notwithstanding anything herein to the
contrary, this Paragraph 7(a) shall not apply to Custodian's engagement of
foreign sub-custodians, which shall instead be governed by Paragraph 27 hereof.
(b) Promptly after the close of business on each day, Custodian shall
furnish the Trust with confirmations and a summary of all transfers to or from
the account of each Fund during said day. Where securities are transferred to
the account of any Fund established at a Securities Depository or the Book Entry
System pursuant to Paragraph 8 herein, Custodian shall also, by book-entry or
otherwise, identify as belonging to such Fund the quantity of securities in a
fungible bulk of securities registered in the name of Custodian (or its nominee)
or shown in Custodian's account on the books of a Securities Depository or the
Book-Entry System. At least monthly and from time to time, Custodian shall
furnish the Trust with a detailed statement of the Property held for each Fund
under this Agreement.
(c) Notwithstanding any provision elsewhere contained herein, Custodian
shall not be required to obtain possession of any instrument or certificate
representing any futures contract, any option, or any futures contract option
until after it shall have determined, or shall have received an Officer's
Certificate from the Trust stating that any such instruments or certificates are
available. The Trust shall deliver to Custodian such an Officer's Certificate no
later than the business day preceding the availability of any such instrument or
certificate. Prior to such availability, Custodian shall comply with the 1940
Act in connection with the purchase, sale, settlement, closing out or writing of
futures contracts, options, or futures contract options by making payments or
deliveries specified in such Officer's Certificates or Written Instructions
received by Custodian in connection with any such purchase, sale, writing,
settlement or closing out upon its receipt from a broker, dealer, or futures
commission merchant of a statement or confirmation reasonably believed by
Custodian to be in the form customarily used by brokers, dealers, or future
commission merchants with respect to such futures contracts, options, or futures
contract options, as the case may be, confirming that the same is held by such
broker, dealer or futures commission merchant, in book-entry form or otherwise,
in the name of Custodian (or any nominee of Custodian) as Custodian for the
Fund, provided, however, that notwithstanding the foregoing, and subject to
Paragraph 13(b) hereof, payments to or deliveries from any margin account, and
payments with respect to future contracts, options, or future contract options
to which a margin account relates, shall be made in accordance with the terms
and conditions of the Trust's relevant margin account agreement. Whenever any
such instruments or certificates are available, Custodian shall, notwithstanding
any provision in this Agreement to the contrary, make payment for any futures
contract, option, or futures contract option for which such instruments or such
certificates are available against the delivery to Custodian of such instrument
or such certificate, and deliver any futures contract, option or futures
contract option for which such instruments or such certificates are available
only against receipt
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by Custodian of payment therefor. Any such instrument or certificate delivered
to Custodian shall be held by Custodian hereunder in accordance with, and
subject to, the provisions of this Agreement.
8. Use of Securities Depository or the Book-Entry System. The Trust shall
deliver to Custodian a certified vote of the Board of Trustees of the Trust
approving, authorizing and instructing Custodian on a continuous and ongoing
basis until instructed to the contrary by Written Instructions: (i) to deposit
in a Securities Depository or the Book-Entry System all securities of the Funds
held hereunder eligible for deposit therein, and (ii) to utilize a Securities
Depository or the Book-Entry System to the extent possible in connection with
the performance of its duties hereunder, including without limitation,
settlements of purchases and sales of securities by the Funds, and deliveries
and returns of securities loaned, subject to repurchase agreements or used as
collateral in connection with borrowings. Without limiting the generality of
such use, the following provisions shall apply thereto:
(a) Securities and any cash of the Funds deposited by Custodian in a
Securities Depository or the Book-Entry System will at all times be segregated
from any assets and cash controlled by Custodian in other than a fiduciary or
custodian capacity. Subject to Paragraph 28(m) hereof, Custodian and its
sub-custodians, if any, will pay out money only upon receipt of securities and
will deliver securities only upon receipt of money, absent Written Instructions
to the contrary.
(b) All books and records maintained by Custodian that relate to the
Funds' participation in a Securities Depository or the Book-Entry System will at
all times during Custodian's regular business hours be open to inspection by the
Trust's duly authorized employees or agents and the Trust's independent auditors
in accordance with applicable regulations, it being understood, however, that
such records may be kept in an off-site Custodian storage location and the Trust
will be furnished with all information in respect of the services rendered to it
as it may require.
(c) Custodian will provide the Trust with copies of any report
obtained by Custodian on the system of internal accounting control of the
Securities Depository or Book-Entry System promptly after receipt of such a
report by Custodian. Custodian will also provide the Trust with such reports on
its own system of internal control as the Trust may reasonably request from time
to time.
9. Instructions Consistent With the Charter, Etc. Unless otherwise
provided in this Agreement, Custodian shall act only upon Officer's
Certificates, Oral Instructions and/or Written Instructions. Custodian may
assume that any Officer's Certificate, Oral Instructions or Written Instructions
received hereunder are not in any way inconsistent with any provision of the
Declaration of Trust or any vote of the Trust's Board of Trustees, or any
committee thereof. Custodian shall be entitled to rely upon any Oral
Instructions or Written Instructions actually received by Custodian pursuant to
this Agreement, and upon any certificate, oral instructions, or written
instructions reasonably
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believed by Custodian to be an Officer's Certificate, Oral Instructions or
Written Instructions. The Trust agrees to forward to Custodian, Written
Instructions confirming Oral Instructions in such manner that the Written
Instructions are received by Custodian at the close of business of the same day
that such Oral Instructions are given to Custodian. The Trust agrees that the
fact that such confirming Written Instructions are not received by Custodian
shall in no way affect the validity of any of the transactions authorized by the
Trust by giving Oral Instructions, and that Custodian's records with respect to
the content of Oral Instructions shall be controlling.
10. Transactions Not Requiring Instructions. Custodian is authorized to
take the following action without Oral Instructions, Written Instructions, or an
Officer's Certificate:
(a) Collection of Income and Other Payments. Custodian shall subject
to Paragraph 28(f) hereof:
(i) Collect and receive for the account of any Fund, all income
and other payments and distributions, including (without limitation) stock
dividends, rights, warrants and similar items, included or to be included in the
Property of any Fund, and promptly advise the Trust of such receipt and shall
credit such income, as collected, to such Fund of the Trust. From time to time,
Custodian may elect, but shall not be so obligated, to credit the account with
interest, dividends or principal payments on the payable or contractual
settlement date, in anticipation of receiving same from a payor, central
depository, Securities Depository, broker or other agent employed by the Trust
or Custodian. Any such crediting and posting shall be at the Trust's sole risk,
and Custodian shall be authorized to reverse (A) any such advance posting in the
event it does not receive good funds from any such payor, central depository,
Securities Depository, broker or agent, and (B) any other payment or crediting,
including, without limitation, payments made by check or draft, in the event it
does not receive good funds or final payment;
(ii) With respect to securities of foreign issue, and subject to
Paragraph 27 hereof, effect collection of dividends, interest and other income,
and to promptly transmit to the Trust all reports, written information or
notices actually received by Custodian as Custodian, including notices of any
call for redemption, offer of exchange, right of subscription, reorganization,
or other proceedings affecting such securities, or any default in payments due
thereon. It is understood, however, that Custodian shall be under no
responsibility for any failure or delay in effecting such collections or giving
such notice with respect to securities of foreign issue, regardless of whether
or not the relevant information is published in any financial service available
to it unless such failure or delay is due to Custodian's own negligence.
Collections of income in foreign currency are, to the extent possible, to be
converted into United States dollars unless otherwise instructed in writing, and
in effecting such conversion Custodian may use such methods or agencies as it
may see fit, including the facilities of its own
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foreign division at customary rates. All risk and expenses incident to such
collection and conversion are for the account of the Funds and Custodian shall
have no responsibility for fluctuations in exchange rates affecting any such
conversions;
(iii) Endorse and deposit for collection in the name of the Trust
and each of its Funds, checks, drafts, or other orders for the payment of money
on the same day as received;
(iv) Receive and hold for the account of each of the Fund's
securities received by the Funds as a result of a stock dividend, share split-up
or reorganization, recapitalization, readjustment or other rearrangement or
distribution of rights or similar securities issued with respect to any
portfolio securities of the Funds held by Custodian hereunder;
(v) Present for payment and collect the amount payable upon all
securities which may mature or be called, redeemed or retired, or otherwise
become payable on the date such securities become payable, but, with respect to
calls, early redemptions, or early retirements, only if Custodian either: (i)
receives a written notice of the same, or (ii) notice of the same appears in one
or more of the publications then listed in Appendix A hereto, which Appendix may
be amended to add other publications at any time by Custodian without prior
notice to or consent from the Trust and which may be amended to delete a
publication with the prior notice and consent from the Trust;
(vi) Subject to Paragraphs 28(e) and (f) hereof, take any action
which may be necessary and proper in connection with the collection and receipt
of such income and other payments and the endorsement for collection of checks,
drafts and other negotiable instructions; and
(vii) With respect to domestic securities, to exchange securities
in temporary form for securities in definitive form, to effect an exchange of
the shares where the par value of stock is changed, and to surrender securities
at maturity or when advised by the Trust or the investment adviser to the Trust
of an earlier call for redemption, against payment therefor in accordance with
accepted industry practice. When fractional shares of stock of a declaring
corporation are received as a stock distribution, Custodian is authorized to
sell the fraction received and credit the Trust's account. Unless specifically
instructed to the contrary in writing, Custodian is authorized to exchange
securities in bearer form for securities in registered form. If any Property
registered in the name of a nominee of Custodian is called for partial
redemption by the issuer of such Property, Custodian is authorized to allot the
called portion to the respective beneficial holders of the Property in such
manner deemed to be fair and equitable by Custodian in its reasonable
discretion.
(b) Miscellaneous Transactions. Custodian is authorized to deliver or
cause to be delivered Property against payment or other consideration or written
receipt therefor in the following cases:
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(i) for examination by a broker selling for the account of the
Trust in accordance with street delivery custom;
(ii) for the exchange for interim receipts or temporary
securities for definitive securities;
(iii) for transfer of securities into the name of the Funds or
Custodian or a nominee of either, or for exchange of securities for a different
number of bonds, certificates, or other evidence, representing the same
aggregate face amount or number of units bearing the same interest rate,
maturity date and call provisions, if any; provided that, in any such case, the
new securities are to be delivered to Custodian.
11. Transactions Requiring Instructions. Upon receipt of Oral or Written
Instructions, and not otherwise, Custodian, directly or through the use of a
Securities Depository or the Book-Entry System, shall:
(a) execute and deliver to such persons as may be designated in such
Oral or Written Instructions, proxies, consents, authorizations, and any other
instruments whereby the authority of the Funds as owners of any securities may
be exercised;
(b) deliver any securities held for any Fund against receipt of other
securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or recapitalization of any
corporation, or the exercise of any conversion privilege;
(c) deliver any securities held for any Fund to any protective
committee, reorganization committee or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization or sale of
assets of any corporation, against receipt of such certificates or deposit,
interim receipts or other instruments or documents as may be issued to it to
evidence such delivery;
(d) make such transfers or exchanges of the assets of any Fund and
take such other steps as shall be stated in said instructions to be for the
purposes of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the Funds;
(e) subject to Paragraph 25(b) hereof, release securities belonging to
any Fund to any bank or trust company for the purpose of pledge or hypothecation
to secure any loan incurred by such Fund; provided, however, that securities
shall be released only upon payment to Custodian of the monies borrowed, except
that in cases where additional collateral is required to secure a borrowing
already made, subject to proper prior authorization, further securities may be
released for that purpose; and pay such loan upon redelivery to it of the
securities pledged or hypothecated therefor and upon surrender of the note or
notes evidencing the loan;
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(f) deliver any securities held for any Fund upon the exercise of a
covered call option written by such Fund on such securities;
(g) release and deliver securities owned by a Fund in connection with
any repurchase agreement entered into on behalf of such Fund, but subject to
Paragraph 28(m) hereof, only on receipt of payment therefor; and pay out monies
of such Fund in connection with such repurchase agreements, but only upon the
delivery of the securities;
(h) otherwise transfer, exchange or deliver securities in accordance
with Oral or Written Instructions specifying the purpose of such transfer,
including without limitation, loans of securities, short sales, or reverse
repurchase agreements, and subject to Paragraph 7(a) hereof.
12. Segregated Accounts. Custodian shall upon receipt of Written or Oral
Instructions establish and maintain a segregated account or accounts on its
records for and on behalf of any Fund, into which account or accounts shall be
credited, but only pursuant to an Officer's Certificate or Written Instructions
specifying the particular securities and/or amount of cash, cash and/or
securities, including securities in the Book-Entry System: (i) for the purposes
of compliance by the Funds and the Trust with the procedures required by a
securities or option exchange, (ii) for the purpose of compliance by the Funds
and the Trust with the 1940 Act and Release No. 10666 or any subsequent release,
releases or any other guidance of the SEC relating to the maintenance of
segregated accounts by registered investment companies, and (iii) for other
proper corporate purposes.
13. Dividends and Distributions.
(a) The Trust shall furnish Custodian with appropriate evidence of
action by the Trust's Board of Trustees declaring and authorizing the payment of
any dividends and distributions. Upon receipt by Custodian of an Officer's
Certificate with respect to dividends and distributions declared by the Trust's
Board of Trustees and payable to interestholders of any Fund who are entitled to
receive cash for fractional shares and those who have elected in the proper
manner to receive their distributions on dividends in cash, and in conformance
with procedures mutually agreed upon by Custodian and the Trust, and the Trust's
administrator or transfer agent, Custodian shall pay to the Fund's transfer
agent, as agent for the interestholders, an amount equal to the amount indicated
in said Officer's Certificate as payable by the Fund to such interestholders for
distribution in cash by the transfer agent to such interestholders.
(b) Custodian may enter into separate custodial agreements with
various futures commission merchants ("FCMs") that the Trust uses (each a "FCM
Agreement"), pursuant to which the Funds' margin deposits in any transactions
involving futures contracts and options on futures contracts will be held by
Custodian in accounts (each a "FCM Account") subject to the disposition by the
FCM involved in such contracts in
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accordance with the customer contract between the FCM and the Trust ("FCM
Contract"), SEC rules governing such segregated accounts, Commodity Futures
Trading Commission ("CFTC") rules and the rules of the applicable commodities
exchange. Such FCM Agreements shall only be entered into by Custodian upon
receipt by Custodian of Written Instructions from the Trust which state that:
(i) an FCM Contract has been entered into; (ii) the Trust is in compliance with
all the rules and regulations of the CFTC; and (iii) the FCM Agreement is
acceptable to the Trust. Transfers of initial margin shall be made into a FCM
Account only upon Written Instructions; transfers of premium and variation
margin may be made into an FCM Account pursuant to Oral Instructions. Transfers
of funds from a FCM Account to the FCM for which Custodian holds such an account
may only occur in accordance with the terms of the FCM Agreement.
14. Purchase of Securities. Promptly after each purchase of securities by
the Trust on behalf of any Fund, the Trust shall deliver to Custodian Oral or
Written Instructions specifying with respect to each such purchase: (a) the name
of the issuer and the title of the securities; (b) the number of shares of the
principal amount purchased and accrued interest, if any; (c) the dates of
purchase and settlement; (d) the purchase price per unit; (e) the total amount
payable upon such purchase; (f) the name of the person from whom or the broker
through whom the purchase was made; and (g) the Fund for which the purchase was
made. Custodian shall upon receipt of securities purchased by or for the Trust
pay out of the monies held for the account of the Trust the total amount payable
to the person from whom or the broker through whom the purchase was made,
provided that the same conforms to the total amount payable as set forth in such
Oral or Written Instructions.
15. Sales of Securities. Promptly after each sale of securities by the
Funds, the Trust shall deliver to Custodian Oral or Written Instructions,
specifying with respect to each such sale: (a) the name of the issuer and the
title of the security; (b) the number of shares or principal amount sold, and
accrued interest, if any; (c) the dates of sale; (d) the sale price per unit;
(e) the total amount payable to the Trust upon such sale; (f) the name of the
broker through whom or the person to whom the sale was made; and (g) the Fund
for which the sale was made. Custodian shall, subject to Paragraph 28(m) hereof,
deliver the securities against payment of the total amount payable to the Trust
upon such sale, provided that the same conforms to the total amount payable as
set forth in such Oral and Written Instructions.
16. Records. The books and records pertaining to the Funds and the Trust
which are in the possession of Custodian shall be the property of the Trust.
Such books and records shall be prepared and maintained as required by the 1940
Act and other applicable securities laws, rules and regulations. The SEC, the
Trust, or the Trust's authorized representatives, shall have access to such
books and records at all times during Custodian's normal business hours. Upon
the reasonable request of the Trust, copies of any such books and records shall
be provided by Custodian to the Trust or the Trust's
12
authorized representative, and the Trust shall reimburse Custodian
reasonable expenses for providing such copies. Upon reasonable request of the
Trust, Custodian shall provide in hard copy, tape or on micro-film, or such
other medium as agreed to among the Trust and Custodian, and any books and
records maintained by Custodian.
17. Reports.
(a) Custodian shall furnish the Trust the following reports:
(i) such periodic and special reports as the Trust may reasonably
request from time to time;
(ii) a monthly statement summarizing all transactions and entries
for the account of each Fund;
(iii) a monthly report of portfolio securities belonging to each
Fund showing the adjusted average cost of each issue and market value at the end
of such month;
(iv) a monthly report of the cash account of each Fund showing
disbursements;
(v) the reports to be furnished to the Trust pursuant to Rule
17f-4 under the 1940 Act; and
(vi) such other information as may be agreed upon from time to
time between the Trust and Custodian.
(b) Subject to Paragraphs 5 and 27(g) hereof, Custodian shall transmit
promptly to the Trust any proxy statement, proxy materials, notice of a call or
conversion or similar communications actually received by Custodian as custodian
of the Property.
(c) Custodian shall report as the market value at the end of each
month the last closing bid, offer or sale price to the extent, and as the same,
is furnished to Custodian by a pricing or similar service utilized or subscribed
to by Custodian. Custodian shall not be responsible for, have any liability with
respect to, or be under any duty to inquire into, nor deemed to make any
assurances with respect to, the accuracy or completeness of such information,
even if The Bank of New York in performing services for others, including
services similar to those performed hereunder, receives different valuations of
the same or different securities of the same issuer.
18. Cooperation with Accountants. Custodian shall cooperate with the
Trust's independent certified public accountants and shall take all reasonable
action in the performance of its obligations under this Agreement, to assure
that the necessary information is made available to such accountants.
13
19. Confidentiality. Custodian agrees on behalf of itself and its employees
to treat all record and other information relative to the Trust, its prior,
present or potential interestholders, its service providers and its prior,
present or potential customers, as confidential information, and to protect and
safeguard the same to the extent required by applicable law, provided, however,
that Custodian may make such disclosure as required by applicable law,
regulation, court order, decrees or legal process and upon receipt of any of the
foregoing requiring such disclosure, Custodian's only obligation shall be to
notify the Trust thereof. Custodian further agrees not to otherwise use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Trust.
20. Equipment Failures. In the event of equipment failures beyond
Custodian's control, Custodian shall take reasonable steps to minimize service
interruptions but shall not have any further liability with respect thereto.
Notwithstanding the foregoing, Custodian shall maintain sufficient back up
electronic data processing equipment to enable Custodian to fulfill its
obligations under this Agreement consistent with standard industry practices.
21. Right to Receive Advice.
(a) Advice of Fund. If Custodian shall be in doubt as to any action to
be taken or omitted by Custodian, it may request, and shall receive, from the
Trust clarification or advice, including Oral or Written Instructions.
(b) Advice of Counsel. If Custodian shall be in doubt as to any
question of law involved in any action to be taken or omitted by Custodian, it
may request at its option advice from its own counsel, at its own expense, or
advice from the Trust's counsel.
(c) Conflicting Advice. In case of conflict between directions, advice
or Oral or Written Instructions received by Custodian pursuant to subparagraph
(a) of this paragraph and advice received by Custodian pursuant to subparagraph
(b) of this paragraph, Custodian shall be entitled to rely on and follow the
advice received pursuant to subparagraph (b) alone.
(d) Protection of Custodian. Custodian shall be protected in any
action or inaction which it takes or omits to take in reliance on any
directions, advice or Oral or Written Instructions received pursuant to
subparagraphs (a) or (b) of this section which it, after receipt of any such
directions, advice or Oral or Written Instructions, in good faith reasonably
believes to be consistent with such directions, advice or Oral or Written
Instructions, as the case may be. Nothing in this Paragraph 21 shall be
construed as imposing upon Custodian any obligation: (i) to seek such
directions, advice or Oral or Written Instructions, or (ii) to act in accordance
with such directions, advice or Oral or Written Instructions when received,
unless, under the terms or another provision of this Agreement, the same is a
condition to Custodian's properly taking or omitting to take
14
such action. Nothing in this Paragraph 21(d) shall excuse Custodian when an
action or omission on the part of Custodian constitutes willful misfeasance or
bad faith, or negligence or reckless disregard by Custodian of its duties under
this Agreement.
22. Compliance with Governmental Rules and Regulations. Custodian
undertakes to comply with the laws, rules and regulations of governmental
authorities having jurisdiction over Custodian and its express duties hereunder.
23. Compensation. As compensation for the services rendered by Custodian
during the term of this Agreement, the Trust shall pay to Custodian, in addition
to reimbursement of its out-of-pocket expenses, such compensation as may be
agreed upon from time to time in writing by the Trust and Custodian as set forth
in Schedule III.
24. Indemnification. The Trust agrees to indemnify Custodian against, and
hold harmless from all taxes, charges, expenses (including reasonable fees and
expenses of counsel), assessments, claims, losses, demands and liabilities
whatsoever (including, without limitation, liabilities arising under the 1933
Act, the 1934 Act and the 1940 Act, and any state and foreign securities laws,
all as currently in effect or as may be amended from time to time) and expenses,
including without limitation, reasonable attorney's fees and disbursements,
howsoever arising or incurred because of or in connection with this Agreement,
except for such liability, claim, loss, demand, charge, expense, tax or
assessment arising out of Custodian's, or such nominees', willful misconduct or
negligence or reckless disregard of its duties under this Agreement. For the
purposes of this Agreement, including, without limitation, for purposes of
Paragraphs 24 and 28, neither Custodian's acceptance of Instructions in
accordance with Paragraph 26A nor Custodian's use of Foreign Sub-Custodians
pursuant to agreements that do not permit actual examination by independent
public accountants, nor the denial of examination by any Foreign Sub-Custodian,
as defined in Paragraph 27, shall, in and of itself, constitute, or be deemed to
constitute, a breach by Custodian of this Agreement or negligence, willful
misconduct, or reckless disregard of its duties by Custodian, provided the
relevant agreement between Custodian and a Foreign Sub-Custodian satisfies the
requirements of Rule 17f-5.
25. Overdrafts or Indebtedness.
(a) Custodian shall advance funds under this Agreement with respect to any
Fund which results in an overdraft because the moneys held by Custodian in the
separate account for such Fund shall be insufficient to pay the total amount
payable upon a purchase of securities by such Fund, as set forth in an Officer's
Certificate or Oral or Written Instructions, or which results in an overdraft in
the separate account of such Fund for some other reason, or if the Trust is for
any other reason indebted to Custodian, including any indebtedness to The Bank
of New York under the Trust's Cash Management and Related Services Agreement,
(except a borrowing for investment or for temporary or emergency purposes using
securities as collateral pursuant to a separate agreement and subject to the
provisions of Paragraph 25(b) hereof), such overdraft or
15
indebtedness shall be deemed to be a loan made by Custodian to the Trust for
such Fund payable on demand and shall bear interest from the date incurred at a
rate per annum (based on a 360-day year for the actual number of days involved)
equal to the overdraft rate specified in Schedule III to this Agreement. In
addition, the Trust hereby agrees that to the extent of such overdraft or
indebtedness, Custodian shall have a continuing lien, security entitlement and
security interest in and to any property at any time held by it for the benefit
of such Fund or in which the Fund may have an interest which is then in
Custodian's possession or control or in possession or control of any third party
acting on Custodian's behalf. The Trust authorizes Custodian, in its sole
discretion, at any time to charge any such overdraft or indebtedness together
with interest due thereon against any balance of account standing to such Fund's
credit on Custodian's books. In addition, the Trust hereby covenants that on
each Business Day on which either it intends to enter a Reverse Repurchase
Agreement and/or otherwise borrow from a third party, or which next succeeds a
Business Day on which at the close of business the Trust had outstanding a
Reverse Repurchase Agreement or such a borrowing, it shall prior to 1:00 p.m.,
New York City time, advise Custodian, in writing, of each such borrowing, shall
specify the Fund to which the same relates, and shall not incur any indebtedness
not so specified other than from Custodian.
(b) The Trust will cause to be delivered to Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, Custodian)
from which it borrows money for investment or for temporary or emergency
purposes using securities held by Custodian hereunder as collateral for such
borrowings, a notice or undertaking in the form currently employed by such bank
setting forth the amount which such bank will loan to the Trust against delivery
of a stated amount of collateral. The Trust shall promptly deliver to Custodian
Written Instructions specifying with respect to each such borrowing: (a) the
Fund to which such borrowing relates; (b) the name of the bank; (c) the amount
and terms of the borrowing, which may be set forth by incorporating by reference
an attached promissory note, duly endorsed by the Fund, or other loan agreement;
(d) the time and date, if known, on which the loan is to be entered into; (e)
the date on which the loan becomes due and payable; (f) the total amount payable
to the Fund on the borrowing date; (g) the market value of securities to be
delivered as collateral for such loan, including the name of the issuer, the
title and the number of shares or the principal amount of any particular
securities and (h) a statement specifying whether such loan is for investment
purposes or for temporary or emergency purposes and that such loan is in
conformance with the 1940 Act and the Fund's prospectus. Custodian shall deliver
on the borrowing date specified in Written Instructions the specified collateral
and the executed promissory note, if any, against delivery by the lending bank
of the total amount of the loan payable, provided that the same conforms to the
total amount payable as set forth in such Written Instructions. Custodian may,
at the option of the lending bank, keep such collateral in its possession, but
such collateral shall be subject to all rights therein given the lending bank by
virtue of any promissory note or loan agreement. Custodian shall deliver such
securities as additional collateral as may be specified in Written Instructions
to collateralize further any transaction described in this
16
Paragraph 25(b). The Trust shall cause all securities released from collateral
status to be returned directly to Custodian, and Custodian shall receive from
time to time such return of collateral as may be tendered to it. In the event
that the Trust fails to specify in Written Instructions the Fund, the name of
the issuer, the title and number of shares or the principal amount of any
particular securities to be delivered as collateral by Custodian, Custodian
shall not be under any obligation to deliver any securities.
26 A. Instructions.
(a) It is understood and agreed that Custodian may, from time to time,
provide software to the Trust for purposes of enabling a Fund to transmit
Instructions to Custodian (the "Software"). Such Software has been designed to
include password protection or other features to restrict the use of the
Software to Authorized Persons; provided, however, that the Custodian makes no
warranty or representations of any kind with respect to such protections or
features, express or implied, including, but not limited to, any implied
warranties of merchantability or fitness for a particular purpose. The Trust and
the Custodian shall use commercially reasonable efforts to develop other
mechanisms (i) to enable the Trust to restrict the use of the Software to
Authorized Persons, (ii) to identify transmissions from a terminal other than an
authorized terminal, and (iii) for the prompt and accurate transmission of
Instructions by Authorized Persons to Custodian. It is further understood and
agreed that Custodian may provide specialized hardware or other equipment to
enable the Trust and the Funds to utilize the Software. With respect to any such
Software, Custodian grants to the Trust and its service providers a personal,
nontransferable and nonexclusive license to use the Software solely for the
purpose of transmitting Instructions to, and receiving communications from,
Custodian in connection with its account(s). The Trust and its service providers
agree not to sell, reproduce, lease or otherwise provide, directly or
indirectly, the Software or any portion thereof to any third party without the
prior written consent of Custodian. At no time shall the Trust be obligated to
use the Software to transmit Instructions to Custodian.
(b) The Trust shall obtain and maintain at its own cost and expense all
equipment and services, including but not limited to communications services,
necessary for it to utilize the Software and transmit Instructions to Custodian;
provided, however, that the parties acknowledge and agree that if any
specialized equipment is necessary to enable the Trust to utilize the Software,
Custodian shall, at its own expense, provide and maintain such equipment.
(c) The Trust acknowledges that the Software, all databases made available
to the Trust by utilizing the Software (other than databases relating solely to
the assets of the Funds and transactions with respect thereto), and any
proprietary data, processes, information and documentation (other than those
which are or become part of the public domain or are legally required to be made
available to the public) (collectively, the "Information"), are the exclusive
and confidential property of Custodian. The Trust shall keep the Information
confidential by using the same care and discretion that the
17
Trust uses with respect to its own confidential property and trade secrets
and shall neither make nor permit any disclosure without the prior written
consent of Custodian. Upon termination of this Agreement or the Software license
granted hereunder for any reason, the Trust shall return to Custodian all copies
of the Information which are in its possession or under its control or which the
Trust distributed to third parties.
(d) Custodian reserves the right to modify the Software from time to time
upon reasonable prior notice and the Trust shall, if it desires in its sole
discretion to continue to use the Software, install new releases of the Software
as Custodian may direct. The Trust agrees not to modify or attempt to modify the
Software without Custodian's prior written consent. The Trust acknowledges that
any modifications to the Software, whether by the Trust or Custodian and whether
with or without Custodian's consent, shall become the property of Custodian.
(e) Where the method for transmitting Instructions by the Trust involves an
automatic systems acknowledgment to the Trust by Custodian of its receipt of
such Instructions, including any transmission of Instructions using the
Software, then (i) if an acknowledgment is not actually received by the Trust,
Custodian shall not be deemed to have received any such Instructions, and (ii)
if an acknowledgment is actually received by the Trust, the Custodian shall be
deemed to have received such Instructions and shall be responsible for any
error, omission, interruption or delay in connection with the transmission of
such Instructions; provided, however, that the Trust shall promptly review all
acknowledgments actually received and notify the Custodian in the event of any
apparent discrepancy.
(f) (i) The Trust agrees that where it delivers to Custodian Instructions
hereunder using the Software, it shall be the Trust's sole responsibility to
ensure that only persons duly authorized by the Trust and the correct number of
such persons transmit such Instructions to Custodian and the Trust will cause
all such persons to treat applicable use and authorization codes, passwords and
authentication keys with extreme care, and authorizes Custodian to act in
accordance with and rely upon Instructions received by it pursuant hereto using
the Software. (ii) The Trust hereby represents, acknowledges and agrees that it
is fully informed of the protections and risks associated with the various
methods of transmitting Instructions to Custodian and that there may be more
secure methods of transmitting Instructions to Custodian than the method(s)
selected by the Trust. (iii) With respect to all Oral Instructions and all
Written Instructions other than Instructions delivered to Custodian using the
Software provided by Custodian, Custodian shall exercise all commercially
reasonable efforts to form a reasonable belief that each such instruction has
been given by an Authorized Person and, where required, signed by an appropriate
number of Authorized Person(s).
(g) The Trust shall notify Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, its ability to send
Instructions using the Software provided by Custodian as promptly as
practicable, and in any event within 24
18
hours after the earliest of (i) discovery thereof, (ii) the business day on
which discovery should have occurred through the exercise of reasonable care and
(iii) in the case of any error, the date of actual receipt of the earliest
notice which reflects such error, it being agreed that discovery and receipt of
notice may only occur on a business day. Custodian shall, as promptly as
practicable, and in any event within 24 hours after the earliest of (i)
discovery thereof, (ii) the business day on which discovery should have occurred
through the exercise of reasonable care and (iii) in the case of any error, the
date of actual receipt of the earliest notice which reflects such error, it
being agreed that discovery and receipt of notice may only occur on a business
day, advise the Trust whenever Custodian learns or reasonably should have
learned, of any errors, omissions or interruption in, or delay or unavailability
of, the Trust's ability to send Instructions using the Software provided by
Custodian.
26 B. FX Transactions.
(a) Whenever a Fund shall enter into a FX Transaction, the Fund shall
promptly deliver to Custodian a Certificate or Oral Instructions specifying with
respect to such FX Transaction: (i) the Series to which such FX Transaction is
specifically allocated; (ii) the type and amount of Currency to be purchased by
the Fund; (iii) the type and amount of Currency to be sold by the Fund; (iv) the
date on which the Currency to be purchased is to be delivered; (v) the date on
which the Currency to be sold is to be delivered; and (vi) the name of the
person from whom or through whom such Currencies are to be purchased and sold.
Unless otherwise instructed by a Certificate or Oral Instructions, Custodian
shall deliver, or shall instruct a Foreign Sub-Custodian to deliver, the
Currency to be sold on the date on which such delivery is to be made, as set
forth in the Certificate, and shall receive, or instruct a Foreign Sub-Custodian
to receive, the Currency to be purchased on the date as set forth in the
Certificate.
(b) Where the Currency to be sold is to be delivered on the same day as the
Currency to be purchased, as specified in the Certificate or Oral Instructions,
Custodian or a Foreign Sub-Custodian may arrange for such deliveries and
receipts to be made in accordance with the customs prevailing from time to time
among brokers or dealers in Currencies, and such receipt and delivery may not be
completed simultaneously. The Fund assumes all responsibility and liability for
all credit risks involved in connection with such receipts and deliveries, which
responsibility and liability shall continue until the Currency to be received by
the Fund has been received in full.
(c) Any foreign exchange transaction effected by Custodian in connection
with this Agreement may be entered with Custodian, any office, branch or
subsidiary of The Bank of New York, or any Foreign Sub-Custodian (as defined
below) acting as principal or otherwise through customary banking channels. The
Fund may issue a standing Certificate with respect to foreign exchange
transactions but Custodian may establish rules or limitations concerning any
foreign exchange facility made available to
19
the Fund. The Fund shall bear all risks of investing in securities or holding
Currency. Without limiting the foregoing, the Fund shall bear the risks that
rules or procedures imposed by a Foreign Sub-Custodian or foreign depositories,
exchange controls, asset freezes or other laws, rules, regulations or orders
shall prohibit or impose burdens or costs on the transfer to, by or for the
account of the Fund of securities or any cash held outside the Fund's
jurisdiction or denominated in Currency other than its home jurisdiction or the
conversion of cash from one Currency into another Currency. Custodian shall not
be obligated to substitute another Currency for a Currency (including a Currency
that is a component of a Composite Currency Unit) whose transferability,
convertibility or availability has been affected by such law, regulation, rule
or procedure. Neither Custodian nor any Foreign Sub-Custodian shall be liable to
the Fund for any loss resulting from any of the foregoing events.
27 A. Duties of Custodian with Respect to Property of any Fund Held Outside
of the United States by a Foreign Sub-Custodian.
(a) Custodian is authorized and instructed to employ, as sub-custodian for
each Fund's Foreign Assets, as defined in Rule 17f-5 under the 1940 Act,
Eligible Foreign Custodians as defined in said Rule 17f-5 selected from time to
time by Custodian as the Foreign Custody Manager appointed by the Trust's Board
of Trustees ("Foreign Sub-Custodians") to carry out their respective
responsibilities in accordance with the terms of the sub-custodian agreement
between each such Foreign Sub-Custodian and Custodian (each such agreement, a
"Foreign Sub-Custodian Agreement"). Upon receipt of an Officer's Certificate,
the Trust may designate any additional foreign sub-custodian with which
Custodian has an agreement for such entity to act as Custodian's agent, as its
sub-custodian and any such additional foreign sub-custodian shall be deemed a
Foreign Sub-Custodian hereunder. Upon receipt of an Officer's Certificate,
Custodian shall cease using any one or more Foreign Sub-Custodians for the
Fund's assets.
(b) Each Foreign Sub-Custodian Agreement shall be substantially in the form
delivered to the Trust herewith and will not be amended in a way that materially
or adversely affects the Trust without the Trust's prior written consent.
(c) Custodian shall identify on its books as belonging to each Fund the
Foreign Assets of such Fund held by each Foreign Sub-Custodian. At the election
of the Trust, it shall be entitled to be subrogated to any claims by the Trust
or any Fund against a Foreign Sub-Custodian as a consequence of any loss,
damage, cost, expense, liability or claim sustained or incurred by the Trust or
any Fund if and to the extent that the Trust or such Fund has been made whole by
Custodian for any such loss, damage, cost, expense, liability or claim.
(d) Upon request of the Trust, Custodian will, consistent with the terms of
the applicable Foreign Sub-Custodian Agreement, use reasonable efforts to
arrange for the independent accountants of the Trust to be afforded access to
the books and records of any Foreign Sub-Custodian insofar as such books and
records relate to the
20
performance of such Foreign Sub-Custodian under its agreement with Custodian on
behalf of the Trust.
(e) Custodian will supply to the Trust from time to time, as mutually
agreed upon, statements in respect of the Foreign Assets of each Fund held by
Foreign Sub-Custodians, including but not limited to, an identification of
entities having possession of each Fund's Foreign Assets, and advises or
notifications of any transfers of Foreign Assets to or from each custodial
account maintained by a Foreign Sub-Custodian for Custodian on behalf of the
Fund.
(f) Custodian shall transmit promptly to the Trust all notices, reports or
other written information received pertaining to the Funds' Foreign Assets,
including without limitation, notices of corporate action, proxies and proxy
solicitation materials.
(g) Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for securities received for the account of the Trust or
any Fund and delivery of securities maintained for the account of the Trust or
any 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, delivery of 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.
(h) With respect to any losses or damages arising out of or relating to any
actions or omissions of any Foreign Sub-Custodian, the sole responsibility and
liability of Custodian shall be to take all appropriate and reasonable action at
the Trust's expense to recover such loss or damage from the Foreign
Sub-Custodian. It is expressly understood and agreed that, unless Custodian has
breached its standard of care set forth in Paragraph 28 hereof, Custodian's sole
responsibility and liability shall be limited to amounts so recovered from the
Foreign Sub-Custodian.
27 B. Property of Any Fund Held Outside of the United States by a Foreign
Depository.
(a) Custodian is authorized and instructed to employ, and to authorize any
Foreign Sub-Custodian to employ, an Eligible Securities Depository as defined in
Rule 17f-7 under the 1940 Act (the "Rule") to hold foreign securities and other
assets of each Fund. The use of any particular Eligible Securities Depository as
defined in the Rule shall be authorized by an Officer's Certificate provided to
Custodian specifying, or by delivery of Oral or Written Instructions
contemplating or requiring the use of, such Eligible Securities Depository. Use
of any such Eligible Securities Depository shall be subject to the rules and
procedures of any such Eligible Securities Depository.
(b) The Trust hereby represents and warrants, which representations and
warranties shall be continuing and shall be deemed to be reaffirmed upon any
delivery of
21
an Officer's Certificate specifying such an Eligible Securities Depository,
or any giving of Oral or Written Instructions contemplating or requiring the use
of a Foreign Depository, as the case may be, that the Trust or its investment
advisor has determined that the custody arrangements of such Eligible Securities
Depository provide reasonable safeguards against the custody risks associated
with maintaining assets with such Eligible Securities Depository within the
meaning of the Rule.
(c) With respect to each Eligible Securities Depository as defined in the
Rule, Custodian shall exercise reasonable care, prudence, and diligence such as
a person having responsibilities for the safekeeping of the Fund's Foreign
Assets would exercise in (i) providing the Fund and its investment adviser with
an analysis of the custody risks associated with maintaining assets with the
Foreign Depository, and (ii) monitoring such custody risks on a continuing basis
and promptly notifying the Fund and its investment adviser of any material
change in such risks. Custodian shall also provide to a Fund with respect to the
status of an institution as an Eligible Securities Depository information
gathered from Foreign Sub-Custodians or trade associations of which Custodian is
a member and other publicly available information obtained by Custodian. The
Fund acknowledges and agrees that such analysis and monitoring shall not include
any evaluation of Country Risks. Custodian will endeavor to include in its
analysis and monitoring, where appropriate among other things, a Foreign
Depository's expertise and market reputation, the quality of its services, its
financial strength, any insurance or indemnification arrangements, the extent
and quality of regulation and independent examination of the depository, its
standing in published ratings, its internal controls and other procedures for
safeguarding investments, and any related legal protections. As used herein the
term "Country Risks" shall mean with respect to any Foreign Depository: (a) the
financial infrastructure of the country in which it is organized, but not of any
Foreign Depository to the extent covered by an analysis described in clause (i)
of this Section, (b) such country's prevailing settlement practices, (c)
nationalization, expropriation or other governmental actions, (d) such country's
regulation of the banking or securities industry, (e) currency controls,
restrictions, devaluations or fluctuations, and (f) market conditions which
affect the order execution of securities transactions or affect the value of
securities.
(d) With respect to any losses or damages arising out of or relating to any
actions or omissions of any Eligible Securities Depository as defined in the
Rule, the sole responsibility and liability of Custodian shall be to take all
appropriate and reasonable action at the Trust's expense to recover such loss or
damage from the Eligible Securities Depository. It is expressly understood and
agreed that, unless Custodian has breached its standard of care set forth in
Paragraph 28 hereof, Custodian's sole responsibility and liability shall be
limited to amounts so recovered from the Eligible Securities Depository.
28. Concerning Custodian.
(a) (i) Custodian shall exercise reasonable care, prudence, and diligence
and act in good faith and use all commercially reasonable efforts in the
performance of its
22
duties hereunder. Custodian shall be responsible to the Trust for its own
failure or the failure of any sub-custodian that it shall appoint (other than a
Foreign Sub-Custodian referred to in Paragraph 27 or a sub-custodian appointed
by Custodian at the specific direction of the Trust) or that of its employees or
agents, to perform its duties, obligations or responsibilities in accordance
with this Agreement, but only to the extent that such failure results from acts
or omissions that constitute willful misfeasance, bad faith or negligence on the
part of Custodian, or on the part of its employees or agents, or reckless
disregard of such duties, obligations and responsibilities.
(ii) Without limiting the generality of the foregoing or any other
provision of this Agreement, in no event shall Custodian be liable to the Fund
or any third party nor, except as otherwise provided in this subparagraph for
special, indirect or consequential damages or lost profits or loss of business,
arising under or in connection with this Agreement, even if previously informed
of the possibility of such damages and regardless of the form of action.
Custodian may, with respect to questions of law arising under any FCM Agreement,
apply for and obtain the advice and opinion of counsel to the Trust at the
expense of the Trust, or of its own counsel at its own expense, and shall be
fully protected with respect to anything done or omitted by it in good faith in
conformity with such advice or opinion. Custodian shall be liable to the Trust
for any loss or damage resulting from the use of the Book-Entry System or any
Securities Depository arising by reason of any negligence or willful misconduct
on the part of Custodian or any of its employees or agents.
(iii) Custodian's liability pursuant to the last sentence of
subparagraph (a)(i) shall include, but not be limited to, reimbursing the Trust
for court-ordered damage awards, fines, penalties, and judicially-approved
settlements (and attorney's fees and disbursements relating thereto) arising out
of or in connection with the conduct giving rise to such liability.
(iv) If the Trust receives notice of the commencement of any action,
suit, or proceeding (an "Action"), or notice that any Action may be commenced,
for which Custodian may be liable to the Trust pursuant to this Paragraph 28,
the Trust shall give notice to Custodian of the commencement of the Action or of
the possibility that an Action will be commenced. Any omission to notify
Custodian will not relieve Custodian from any liability which it may have under
this Paragraph, except to the extent the failure to notify Custodian prejudices
the rights of Custodian. Custodian will be entitled at its sole expense and
liability, to exercise full control of the defense, compromise or settlement of
any such Action, provided that Custodian: (1) notifies the Trust in writing of
Custodian's intention to assume such defense; and (2) retains legal counsel
reasonably satisfactory to the Trust to conduct the defense of such Action. If
Custodian advises the Trust that it does not wish to exercise full control of
any defense, compromise or settlement of any Action, Custodian shall be
responsible for the fees and expenses of counsel selected by the Trust, in
addition to any other amounts for which Custodian may be liable pursuant to this
Paragraph 28. The other person will cooperate
23
with the person assuming the defense, compromise or settlement of any Action in
accordance with this Paragraph in any manner that such person reasonably may
request. If Custodian so assumes the defense of any such Action, the Trust will
have the right to employ a separate counsel and to participate in (but not
control) the defense, compromise or settlement of the Action, but the fees and
expenses of such counsel will be at the expense of the Trust unless: (a)
Custodian has agreed to pay such fees and expenses, (b) any relief other than
the payment of money damages is sought against the Trust, or (c) the Trust has
been advised by its counsel that there may be one or more defenses available to
it which are different from or additional to those available to Custodian and
that a conflict of interest therefore exists, and in any such case that portion
of the fees and expenses of such separate counsel that are reasonably related to
matters for which Custodian is liable pursuant to this Paragraph will be paid by
Custodian. The Trust will not settle or compromise any such Action for which
Custodian is liable pursuant to this Paragraph without the prior written consent
of Custodian, unless Custodian has failed, after reasonable notice, to undertake
control of such Action in the manner provided in this Paragraph. Custodian will
not settle or compromise any such Action in which any relief other than the
payment of money damages is sought against the Trust without the consent of the
Trust, such consent not to be unreasonably withheld. In the event that Custodian
intends to settle or compromise any Action in which solely money damages are
sought, Custodian shall give the Trust fifteen (15) business days prior written
notice.
(b) Without limiting the generality of the foregoing, Custodian shall
be under no obligation to inquire into, and shall not be liable for:
(i) the validity of the issue of any securities purchased, sold,
or written by or for the Trust or any Fund, the legality of the purchase, sale
or writing thereof, or the propriety of the amount paid or received therefor;
(ii) the legality of the sale or redemption of any Shares, or the
propriety of the amount to be received or paid therefor;
(iii) the legality of the declaration or payment of any dividend
by the Trust;
(iv) the legality of any borrowing by the Trust using securities
as collateral;
(v) the legality of any loan of portfolio securities, or under
any duty or obligation to see to it that any cash collateral delivered to it by
a broker, dealer, or financial institution or held by it at any time as a result
of such loan of portfolio securities is adequate collateral for or against any
loss Custodian, the Trust or any Fund might sustain as a result of such loan.
Custodian specifically, but not by way of limitation, shall not be under any
duty or obligation periodically to check or notify the Trust or any Fund that
the amount of such cash collateral held by Custodian for the Trust is sufficient
collateral for the Trust, but such duty or obligation shall be the sole
responsibility of the
24
Trust. In addition, Custodian shall be under no duty or obligation to see that
any broker, dealer or financial institution to which portfolio securities are
lent makes payment to it of any dividends or interest which are payable to or
for the account of the Trust during the period of such loan or at the
termination of such loan, provided, however, that Custodian shall promptly
notify the Trust in the event that such dividends or interest are not paid and
received when due; or
(vi) the sufficiency or value of any amounts of money and/or
securities held in any segregated account described in Paragraph 12(a) hereof in
connection with transactions by the Funds, or whether such segregated account
provides the compliance intended to be achieved. In addition, Custodian shall
not be under any duty or obligation to see that any broker, dealer, FCM or
Clearing Member makes payment to the Fund of any variation margin payment or
similar payment which the Fund may be entitled to receive from such broker,
dealer, FCM or Clearing Member, to see that any payment received by Custodian
from any broker, dealer, FCM or Clearing Member is the amount the Trust is
entitled to receive, or to notify the Trust or a Fund of Custodian's receipt or
non-receipt of any such payment.
(c) Custodian shall not be liable for, or considered to be
sub-custodian or custodian of, any money, whether or not represented by any
check, draft, or other instrument for the payment of money, received by
Custodian on behalf of the Trust until Custodian actually receives and collects
such money directly or by the final crediting of the account representing the
Fund's interest at the Book-Entry System or a Securities Depository.
(d) Custodian shall not have any responsibility or be liable for
ascertaining or acting upon any calls, conversions, exchange offers, tenders,
interest rate changes or similar matters relating to securities held in a
Securities Depository, unless Custodian shall have actually received timely
notice from such Securities Depository. In no event shall Custodian have any
responsibility or liability for the failure of any Securities Depository to
collect, or for the late collection or late crediting by a Securities Depository
of any amount payable upon securities deposited in a Securities Depository which
may mature or be redeemed, retired, called or otherwise become payable. Upon
receipt of Written Instructions from the Trust of an overdue amount on
securities held in a Securities Depository, Custodian shall make a claim against
a Securities Depository on behalf of the Trust, except that Custodian shall not
be under any obligation to appear in, prosecute or defend any action suit or
proceeding in respect to any securities held by a Securities Depository which in
its opinion may involve it in expense or liability, unless indemnity
satisfactory to it against all expense and liability be furnished as often as
may be required.
(e) Custodian shall not be under any duty or obligation to take action
to effect collection of any amount due to the Trust from a transfer agent of the
Trust nor to take any action to effect payment or distribution by the transfer
agent of the Trust of any
25
amount paid by Custodian to the transfer agent of the Trust in accordance with
this Agreement.
(f) Custodian shall not be under any duty or obligation to take action
to effect collection of any amount, if the securities upon which such amount is
payable are in default, or if payment is refused after due demand or
presentation, unless and until: (i) it shall be directed to take such action by
Written Instructions, and (ii) it shall be assured to its reasonable
satisfaction of reimbursement of its costs and expenses in connection with any
such action.
(g) Custodian may in addition to the employment of Foreign
Sub-Custodians pursuant to Paragraphs 7 and 27, hereof appoint one or more
banking institutions as Depository or Depositories, as a sub-custodian or as
sub-custodians, or as a co-custodian or as co-custodians, including, but not
limited to, banking institutions located in foreign countries, of securities and
moneys at any time owned by the Funds, upon such terms and conditions as may be
approved in an Officer's Certificate or contained in an agreement executed by
Custodian and the Trust and the appointed institution.
(h) Custodian shall not be under any duty or obligation: (i) to
ascertain whether any securities at any time delivered to, or held by it or by
any Foreign Sub-Custodian, for the account of the Trust and specifically
allocated to a Fund are such as properly may be held by the Trust or such Fund
under the provisions of its Prospectus, or (ii) to ascertain whether any
transactions by the Fund, whether or not involving Custodian, are such
transactions as may properly be engaged in by the Fund.
(i) Custodian shall charge its compensation and any expenses with
respect to the Funds of the Trust incurred by Custodian in the performance of
its duties under this Agreement only against the money of the Fund or Funds of
the Trust from which such compensation or expenses is actually due and payable,
and under no circumstances shall any compensation or expenses due to Custodian
be considered to be a joint, or joint and several, obligation of the Funds of
the Trust. To the extent that Custodian is entitled to recover from the Trust
any loss, damage, liability or expense (including counsel fees) under this
Agreement, Custodian shall charge the amount due in respect of such loss,
damage, liability or expense (including counsel fees) only against the money
held by it for the Fund or Funds of the Trust that is/are identified by the
Trust in an Officer's Certificate, unless and until the Trust instructs
Custodian by an Officer's Certificate to charge against money held by it for the
account of a Fund such Fund's pro rata share (based on such Fund's net asset
value at the time of the charge in proportion to the aggregate net asset value
of all Funds at that time) of the amount of such loss, damage, liability or
expense (including counsel fees).
(j) Custodian shall be entitled to rely upon any Officer's
Certificate, Written Instructions, notice or other instrument in writing
received by Custodian and reasonably believed by Custodian, to be an Officer's
Certificate or Written Instructions.
26
Custodian shall be entitled to rely upon any Oral Instructions actually
received by Custodian. The Trust agrees to forward to Custodian Written
Instructions confirming such Oral Instructions in such manner so that such
Written Instructions are received by Custodian, whether by hand delivery,
telecopier or other similar device, or otherwise, by the close of business of
the same day that such Oral Instructions are received by Custodian. The Trust
agrees that the fact that such confirming instructions are not received, or that
contrary instructions are received, by Custodian shall in no way affect the
validity of the transactions or enforceability of the transactions hereby
authorized by the Trust. The Trust agrees that Custodian shall not incur any
liability to the Trust in acting upon Oral Instructions given to Custodian
hereunder concerning such transactions provided such instructions reasonably
appear to have been received from an Authorized Person.
(k) Custodian shall be entitled to rely upon any instrument,
instruction or notice received by it and reasonably believed by it to be given
in accordance with the terms and conditions of any FCM Agreement. Without
limiting the generality of the foregoing, Custodian shall not be under any duty
to inquire into, and Custodian shall not be liable for, the accuracy of any
statements or representations contained in any such instrument or other notice
including, without limitation, any specification of any amount to be paid to a
broker, dealer, futures commission merchant or clearing member.
(l) Custodian shall provide the Trust with any report obtained by
Custodian on the system of internal accounting control of the Book-Entry System,
any Securities Depository utilized hereunder the Depository or the Options
Clearing Corporation, and with such reports on its own systems of internal
accounting control as the Trust may reasonably request from time to time.
(m) Subject to the foregoing provisions of this Agreement, including,
without limitation, those contained in Paragraph 27 hereof, Custodian may
deliver and receive securities, and receipts with respect to such securities,
and arrange for payments to be made and received by Custodian in accordance with
the customs prevailing from time to time among brokers or dealers in such
securities. When Custodian is instructed to deliver securities against payment,
delivery of such securities and receipt of payment therefor may not be completed
simultaneously. The Fund assumes all responsibility and liability for all credit
risks involved in connection with Custodian's delivery of securities pursuant to
proper instructions of the Fund, which responsibility and liability shall
continue until final payment in full has been received by Custodian.
(n) Custodian shall not have any duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against Custodian.
29. Termination. Any of the parties hereto may terminate this Agreement by
giving to the other parties a notice in writing specifying the date of such
termination, which shall be not less than ninety (90) days after the date of
giving of such notice. Upon
27
the date set forth in such notice this Agreement shall terminate, and
Custodian shall on that date deliver directly to the Trust or a successor
custodian designated by the Trust all securities and moneys then owned by the
Trust and held by Custodian, after deducting all fees, expenses and other
amounts for the payment or reimbursement of which it shall then be entitled;
provided, however, that transaction fees and expenses payable by the Trust in
connection with a deconversion to a successor custodian shall be limited to
Custodian's actual direct cost.
30. Notices. All notices and other communications (collectively referred to
as "Notice" or "Notices" in this paragraph) hereunder shall be in writing or by
confirm in telegram, cable, telex, or facsimile sending device. Notices shall be
addressed: (a) if to Custodian, at Custodian's address, 00 Xxxxxxxxxx Xxxxxx,
00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxx Ajosa; (b) if to the
Trust, at the address of the Trust's Secretary, 000 Xxxxxx Xxxxxx, Xxxxxx Xxxx,
Xxxxxxxx 00000, Attention: Xxxxxxx X. Xxxxx, Xx., Secretary; or (c) if to none
of the foregoing, at such other address as shall have been notified to the
sender of any such Notice or other communication. Notice shall be deemed to have
been given when actually received by the other party. All postage, cable,
telegram, telex and facsimile sending device charges arising from the sending of
a Notice hereunder shall be paid by the sender.
31. Further Actions. Each party agrees to perform such further acts and
execute such further documents as it deems necessary to effectuate the purposes
hereof.
32. Amendments. This Agreement or any part hereof may be changed or waived
only by an instrument in writing signed by the party against which enforcement
of such change or waiver is sought.
33. Miscellaneous.
(a) The Trust agrees that Custodian may be a counterparty in any
purchase or sale of foreign currency by or for the Trust on a spot or forward
basis, and on any option to buy or sell foreign currency.
(b) This Agreement embodies the entire Agreement and understanding
between the parties hereto, and supersedes all prior agreements and
understandings relating to the subject matter hereof. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction or
effect. This Agreement shall be deemed to be a contract made in New York and
governed by New York law. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors.
28
34. Release. The names "Nations Funds Trust" and "Trustees of Nations
Funds Trust" refer respectively to the Trust created and the Trustees, as
trustees but not individually or personally, acting from time to time under a
Declaration of Trust which is hereby referred to and a copy of which is on file
at the principal office of the Trust. The obligations of "Nations Funds Trust"
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, Interestholders, or representatives of
the Trust personally, but bind only the Trust Property (as defined in the
Declaration of Trust), and all persons dealing with any class of Shares of the
Trust Property, and all persons dealing with any class of Shares of the Trust
must look solely to the Trust Property belonging to such class for the
enforcement of any claims against the Trust.
35. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
29
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.
NATIONS FUNDS TRUST
By:
------------------------------------------------
A. Xxx Xxxxxx
President and Chairman of the Board of Trustees
THE BANK OF NEW YORK
By:
------------------------------------------------
30
SCHEDULE I
----------
The Custody Agreement between Nations Funds Trust and Sub-Custodian
applies to the following Funds of the Trust:
Nations SmallCap Value Fund
Nations MidCap Value Fund
Nations LargeCap Value Fund
Approved: October 10, 2001
31
SCHEDULE II
-----------
PUBLICATIONS
I, Xxx Xxxxxx, a Vice President with THE BANK OF NEW YORK do hereby designate
the following publications:
The Bond Buyer
Depository Trust Company Services
Financial Daily Card Service
XX Xxxxxx Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
32
SCHEDULE III
------------
Domestic Custodian Fee Schedule
For
Nations Funds Trust
Money Market Funds
Safekeeping/Income Collection/Reporting DTC-ID
Affirmation All Systems Development and Usage Charges
------------------------------------------------------
1/2 of one basis point per annum on the aggregate net assets of all
Nations' Money Market Funds.
Security Transaction Charges
----------------------------
$ 7 DTC/FRB/PTC
$ 15 Physicals
$ 40 Euro C/D's
Other Charges
-------------
$ 5 Bank official checks
$ 2 Money transfers in/out of the Fund's custodian account not
related to securities transactions.
Earnings Credits on Balances/Interest on Overdrafts
---------------------------------------------------
Earnings credits are provided to each Fund on 80% of the daily balance in the
domestic custodian account computed at the 90-day T-xxxx rate on the day of the
balance.
Overdrafts, excluding bank errors, will cause a reduction of earnings credits
daily, computed at 1% above the average Federal Funds rate on the day of the
overdraft.
Credits and debits will be accumulated daily and offset monthly against the
Bank's domestic custodian fees. To the extent a net debit is accumulated, each
Fund will be billed for the expense. To the extent a net earnings credit is
generated, such excess earnings credit can be carried forward to the next
succeeding month. However, no earnings credit will be carried forward after
year-end.
33
Domestic Custodian Fee Schedule
For
Nations Funds Trust
Money Market Funds
Out-of-Pocket Expenses
----------------------
None.
Billing Cycle
-------------
The above fees are billed monthly.
Nations Funds Trust The Bank of New York
------------------- --------------------
Approved by: Approved by:
------------------------ --------------------------
A. Xxx Xxxxxx
President and Chairman of the Board
of Trustees
Date: Date:
34
Domestic Custodian Fee Schedule
For
Nations Funds Trust
Non-Money Market Funds
Safekeeping/Income Collection/Reporting/DTC-ID Affirmation
All Systems Development and Usage Charges
----------------------------------------------------------
3/4ths of one basis point per annum on the aggregate net assets of all
Nations' Non-Money Market Funds up to $10 billion.
1/2 of a basis point on the excess.
Security Transaction Charges/Paydowns
-------------------------------------
$ 5 Paydowns
$ 7 DTC/FRB/PTC
$ 15 Physicals, options, and futures
$ 40 Euro C/D's
Other Charges
-------------
$ 5 Bank official checks
$ 2 Money transfer in/out of the Fund's custodian account not
related to securities transactions.
Earnings Credits on Balances/Interest on Overdrafts
---------------------------------------------------
Earnings credits are provided to each Fund on 80% of the daily balance in the
domestic custodian account computed at the 90-day T-xxxx rate on the day of the
balance. Overdrafts, excluding bank errors, will cause a reduction of earnings
credits daily, computed at 1% above the average Federal Funds rate on the day of
the overdraft. Credits and debits will be accumulated daily and offset monthly
against the Bank's domestic custodian fees. To the extent a net debit is
accumulated, each Fund will be billed for the expense. To the extent a net
earnings credit is generated, such excess earnings credit can be carried forward
to the next succeeding month. However, no earnings credit will be carried
forward after year-end.
35
Domestic Custodian Fee Schedule
For
Nations Funds Trust
Non-Money Market Funds
Out-of-Pocket Expenses
----------------------
None.
Billing Cycle
-------------
The above fees are billed monthly.
Nations Funds Trust The Bank of New York
------------------- --------------------
Approved by: Approved by:
--------------------- -------------------------
A. Xxx Xxxxxx
President and Chairman of the Board
of Trustees
Date: Date:
Customer Contact
----------------
Portfolio trades are coordinated by a dedicated administrative group
reacting to instructions from your authorized persons.
The group consists of a senior officer in charge, administrators
assigned based on activity and complexity and ample backup on hand to
ensure responsiveness to your needs.
Safekeeping of Securities
-------------------------
We are a direct member of all major depositor systems, i.e., Depository
Trust Company, Federal Reserve Book Entry, Participants Trust Company,
etc.
Agreements are in place with sub-custodians for book-entry municipal
bond programs.
Arrangements have been completed for numerous multi-party repurchase
transactions.
Vault Operations are constantly monitored via closed-circuit security
systems.
36
Options/Futures
---------------
Issue escrow or depository receipts.
Collect premiums and effect closing purchase transactions for covered
call options.
Issue guarantee letters for put options.
Agreements are in place with numerous Futures Commission Merchants
(FCMs), to settle transactions and service maintenance margin
requirements.
Segregated accounts are maintained to comply with collateral agreements
with contra-brokers.
Income Collection/Paydowns
--------------------------
Dividends and interest due to the account are pre-posted on the payable
date.
Proceeds from maturing securities are credited on the redemption date.
Paydowns on GNMA, FNMA, FHLMC, and CMOs are posted on payable date and
credited in Federal Funds on the business day after payable date when
the factor is available (95% of issues held).
Securities requiring registration are held in our nominee name to
facilitate both sales and income collection.
Reports
-------
The following reports are provided to allow your staff to monitor
portfolio cash and security transactions:
Daily Custodian Account Journal includes portfolio and cash
transactions of the previous business day.
Cash Balance Projection Report includes all trades reported to us that
have not settled through the previous business day. Pending dividends,
interest, maturities and called bonds are also listed on this report.
Daily report of affirmed/unaffirmed trades.
List of Assets reflects securities and cash held in the custodian
account available daily, weekly, monthly, etc.
37
Monthly Cash Statement - summary of all Daily Custodian Account Journal
activity for the previous month.
Workstation
-----------
Our workstation will afford you the ability to review, edit, enter, and
transmit all trade settlement instructions to the Bank for processing.
Easily accessed via a PC, using a local telephone number, it increases
your flexibility to input and retrieve information while significantly
reducing your communication costs. The system is accessible 24 hours a
day, 7 days a week.
Our Cash Management Report is another of our on-line systems
capabilities providing real-time settlement data regarding the current
day's activity in your account. The activity would include pending and
settled trades, income, paydowns and maturity payments as well as cash
balances. This information puts effective cash management in your
hands.
Another of our dynamic on-line systems is called Q-TRAK. This on-line
module of our system can be used to notify the bank of any inquiries
regarding securities related problems. You can use Q-TRAK to route your
inquiries directly to your Custody Administrative Team. Q-TRAK allows
for prioritization of each inquiry and response, and permits you to
monitor progress on each item as it is being researched. Many of the
Bank's clients have found Q-TRAK to be an excellent tool in achieving
timely resolutions to their questions.
General Servicing
-----------------
Prompt notification of corporate actions.
Corporate literature directly forwarded upon receipt.
Proxies for securities held in our nominee are executed and forwarded
to the Fund for voting.
Payment of your authorized corporate expenses.
38
SCHEDULE IV
---------------
OVERDRAFT RATE
39
