AMENDMENT TO CUSTODY AGREEMENT
This Amendment to the Custody Agreement is made as of March 9, 2004 by
and between SENTINEL GROUP FUNDS, INC., SENTINEL PENNSYLVANIA TAX-FREE TRUST,
AND SENTINEL VARIABLE PRODUCTS TRUST (each a "Fund") and STATE STREET BANK AND
TRUST COMPANY (the "Custodian").
WHEREAS, each Fund and the Custodian entered into a Custody Agreement
dated October 1, 2000 (the "Agreement"). Capitalized terms used in this
Amendment without definition shall have the respective meanings given to such
terms in the Agreement; and
WHEREAS, the Fund and the Custodian desire to amend certain provisions
of the Agreement to reflect revisions to Rule 17f-5 ("Rule 17f-5") and the
adoption of Rule 17f-7 ("Rule 17f-7") promulgated under the Investment Company
Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund and the Custodian desire to amend and restate certain
other provisions of the Agreement relating to the custody of assets of each of
the Portfolios held outside of the United States.
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter contained, the parties hereby agree to
amend the Agreement, pursuant to the terms thereof, as follows:
I. Sections 4 through 9 of the Agreement are hereby renumbered, as of the
effective date of this Amendment, as Sections 6 through 11, respectively.
II. New Sections 4 and 5 of the Agreement are hereby added, as of the effective
date of this Amendment as set forth below.
SECTION 4 PROVISIONS RELATING TO RULES 17F-5 AND 17F-7
SECTION 4.1 DEFINITIONS. AS used throughout this Agreement, the capitalized
terms set forth below shall have the indicated meanings:
"COUNTRY RISK" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment, economic and financial infrastructure
(including any Eligible Securities Depository operating in the country),
prevailing or developing custody and settlement practices, and laws and
regulations applicable to the safekeeping and recovery of Foreign Assets held in
custody in that country.
"ELIGIBLE FOREIGN CUSTODIAN" has the meaning set forth in section (a)(1) of Rule
17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as
defined in Rule 17f-5), a bank holding company meeting the requirements of an
Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate
action of the SEC, or a foreign branch of a Bank (as defined in Section 2(a)(5)
of the 0000 Xxx) meeting the requirements of a custodian under Section 17(f) of
the 1940 Act; the term does not include any Eligible Securities Depository.
"ELIGIBLE SECURITIES DEPOSITORY" has the meaning set forth in section (b)(1) of
Rule 17f-7.
"FOREIGN ASSETS" means any of the Portfolios' investments (including foreign
currencies) for which the primary market is outside the United States and such
cash and cash equivalents as are reasonably necessary to effect the Portfolios'
transactions in such investments.
"FCM" or "FCM" has the meaning set forth in section (a)(3) of Rule 17f-5.
"RULE 17F-5" means Rule 17f-5 promulgated under the 1940 Act.
"RULE 17F-7" means Rule 17f-7 promulgated under the 1940 Act.
SECTION 4.2 THE CUSTODIAN AS FCM OR "FCM".
4.2.1 DELEGATION TO THE CUSTODIAN AS FCM. The Fund, by resolution
adopted by its Board, hereby delegates to the Custodian, subject to Section (b)
of Rule 17f-5, the responsibilities set forth in this Section 3.2 with respect
to Foreign Assets of the Portfolios held outside the United States, and the
Custodian hereby accepts such delegation as FCM with respect to the Portfolios.
4.2.2 COUNTRIES COVERED. The FCM shall be responsible for performing
the delegated responsibilities defined below only with respect to the countries
and custody arrangements for each such country listed on Schedule A to this
Agreement, which list of countries may be amended from time to time by the Fund
with the agreement of the FCM. The FCM shall list on Schedule A the Eligible
Foreign Custodians selected by the FCM to maintain the assets of the Portfolios,
which list of Eligible Foreign Custodians may be amended from time to time in
the sole discretion of the FCM. The FCM will provide amended versions of
Schedule A in accordance with Section 3.2.5 hereof.
Upon the receipt by the FCM of Proper Instructions to open an account or to
place or maintain Foreign Assets in a country listed on Schedule A, and the
fulfillment by the Fund, on behalf of the Portfolios, of the applicable account
opening requirements for such country, the FCM shall be deemed to have been
delegated by the Board on behalf of the Portfolios responsibility as FCM with
respect to that country and to have accepted such delegation. Execution of this
Agreement by the Fund shall be deemed to be a Proper Instruction to open an
account, or to place or maintain Foreign Assets, in each country listed on
Schedule A in which the Custodian has previously placed or currently maintains
Foreign Assets pursuant to the terms of the Agreement. Following the receipt of
Proper Instructions directing the FCM to close the account of a Portfolio with
the Eligible Foreign Custodian selected by the FCM in a designated country, the
delegation by the Board on behalf of the Portfolios to the Custodian as FCM for
that country shall be deemed to have been withdrawn and the Custodian shall
immediately cease to be the FCM of the Portfolios with respect to that country.
The FCM may withdraw its acceptance of delegated responsibilities with respect
to a designated country upon written notice to the Fund. Thirty days (or such
longer period to which the parties agree in writing) after receipt of any such
notice by the Fund, the Custodian shall have no further responsibility in its
capacity as FCM to the Fund with respect to the country as to which the
Custodian's acceptance of delegation is withdrawn.
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4.2.3 SCOPE OF DELEGATED RESPONSIBILITIES:
(a) SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. Subject to the provisions
of this Section 3.2, the FCM may place and maintain the Foreign Assets in the
care of the Eligible Foreign Custodian selected by the FCM in each country
listed on Schedule A, as amended from time to time. In performing its delegated
responsibilities as FCM to place or maintain Foreign Assets with an Eligible
Foreign Custodian, the FCM shall determine that the Foreign Assets will be
subject to reasonable care, based on the standards applicable to custodians in
the country in which the Foreign Assets will be held by that Eligible Foreign
Custodian, after considering all factors relevant to the safekeeping of such
assets, including, without limitation the factors specified in Rule 17f-5(c)(l).
(b) CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS. The FCM shall determine
that the contract governing the foreign custody arrangements with each Eligible
Foreign Custodian selected by the FCM will satisfy the requirements of Rule
17f-5(c)(2).
(c) MONITORING. In each case in which the FCM maintains Foreign Assets
with an Eligible Foreign Custodian selected by the FCM, the FCM shall establish
a system to monitor (i) the appropriateness of maintaining the Foreign Assets
with such Eligible Foreign Custodian and (ii) the contract governing the custody
arrangements established by the FCM with the Eligible Foreign Custodian. In the
event the FCM determines that the custody arrangements with an Eligible Foreign
Custodian it has selected are no longer appropriate, the FCM shall notify the
Board in accordance with Section 3.2.5 hereunder.
4.2.4 GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For purposes
of this Section 3.2, the Board shall be deemed to have considered and determined
to accept such Country Risk as is incurred by placing and maintaining the
Foreign Assets in each country for which the Custodian is serving as FCM of the
Portfolios.
4.2.5 REPORTING REQUIREMENTS. The FCM shall report the withdrawal of
the Foreign Assets from an Eligible Foreign Custodian and the placement of such
Foreign Assets with another Eligible Foreign Custodian by providing to the Board
an amended Schedule A at the end of the calendar quarter in which an amendment
to such Schedule has occurred. The FCM shall make written reports notifying the
Board of any other material change in the foreign custody arrangements of the
Portfolios described in this Section 3.2 after the occurrence of the material
change.
4.2.6 STANDARD OF CARE AS FCM OF A PORTFOLIO. In performing the
responsibilities delegated to it, the FCM agrees to exercise reasonable care,
prudence and diligence such as a person having responsibility for the
safekeeping of assets of management investment companies registered under the
1940 Act would exercise.
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4.2.7 REPRESENTATIONS WITH RESPECT TO RULE 17F-5. The FCM represents to
the Fund that it is a U.S. Bank as defined in section (a)(7) of Rule 17f-5. The
Fund represents to the Custodian that the Board has determined that it is
reasonable for the Board to rely on the Custodian to perform the
responsibilities delegated pursuant to this Agreement to the Custodian as the
FCM of the Portfolios.
4.2.8 EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FCM. The
Board's delegation to the Custodian as FCM of the Portfolios shall be effective
as of the date hereof and shall remain in effect until terminated at any time,
without penalty, by written notice from the terminating party to the
non-terminating party. Termination will become effective thirty (30) days after
receipt by the non-terminating party of such notice. The provisions of Section
3.2.2 hereof shall govern the delegation to and termination of the Custodian as
FCM of the Portfolios with respect to designated countries.
SECTION 4.3 ELIGIBLE SECURITIES DEPOSITORIES.
4.3.1 ANALYSIS AND MONITORING. The Custodian shall (a) provide the Fund
(or its duly-authorized investment manager or investment advisor) with an
analysis of the custody risks associated with maintaining assets with the
Eligible Securities Depositories set forth on Schedule B hereto in accordance
with section (a)(1)(i)(A) of Rule 17f-7, and (b) monitor such risks on a
continuing basis, and promptly notify the Fund (or its duly-authorized
investment manager or investment advisor) of any material change in such risks,
in accordance with section (a)(1)(i)(B) of Rule 17f-7.
4.3.2 STANDARD OF CARE. The Custodian agrees to exercise reasonable
care, prudence and diligence in performing the duties set forth in Section
3.3.1.
SECTION 5 DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS
HELD OUTSIDE THE UNITED STATES
SECTION 5.1 DEFINITIONS. As used throughout this Agreement, the capitalized
terms set forth below shall have the indicated meanings:
"FOREIGN SECURITIES SYSTEM" means an Eligible Securities Depository listed on
Schedule B hereto.
"FOREIGN SUB-CUSTODIAN" means a foreign banking institution serving as an
Eligible Foreign Custodian.
SECTION 5.2 HOLDING SECURITIES. The Custodian shall identify on its books as
belonging to the Portfolios the foreign securities held by each Foreign
Sub-Custodian or Foreign Securities System. The Custodian may hold foreign
securities for all of its customers, including the Portfolios, with any Foreign
Sub-Custodian in an account that is identified as belonging to the Custodian for
the benefit of its customers, provided however, that (i) the records of the
Custodian with respect to foreign securities of the Portfolios which are
maintained in such account shall identify those securities as belonging to the
Portfolios and (ii), to the extent permitted and customary in the market in
which the account is maintained, the Custodian shall require that securities so
held by the Foreign Sub-Custodian be held separately from any assets of such
Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian.
SECTION 5.3 FOREIGN SECURITIES SYSTEMS. Foreign securities shall be maintained
in a Foreign Securities System in a designated country through arrangements
implemented by the Custodian or a Foreign Sub-Custodian, as applicable, in such
country.
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SECTION 5.4 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
5.4.1 DELIVERY OF FOREIGN ASSETS. The Custodian or a Foreign
Sub-Custodian shall release and deliver foreign securities of the Portfolios
held by the Custodian or such Foreign Sub-Custodian, or in a Foreign Securities
System account, only upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the parties, and only in the
following cases:
(i) upon the sale of such foreign securities for the Portfolio in
accordance with commercially reasonable market practice in the country
where such foreign securities are held or traded, including, without
limitation: (A) delivery against expectation of receiving later
payment; or (B) in the case of a sale effected through a Foreign
Securities System, in accordance with the rules governing the operation
of the Foreign Securities System;
(ii) in connection with any repurchase agreement related to foreign
securities;
(iii) to the depository agent in connection with tender or other
similar offers for foreign securities of the Portfolios;
(iv) to the issuer thereof or its agent when such foreign securities
are called, redeemed, retired or otherwise become payable;
(v) to the issuer thereof, or its agent, for transfer into the name of
the Custodian (or the name of the respective Foreign Sub-Custodian or
of any nominee of the Custodian or such Foreign Sub-Custodian) or for
exchange for a different number of bonds, certificates or other
evidence representing the same aggregate face amount or number of
units;
(vi) to brokers, clearing banks or other clearing agents for
examination or trade execution in accordance with market custom;
provided that in any such case the Foreign Sub-Custodian shall have no
responsibility or liability for any loss arising from the delivery of
such securities prior to receiving payment for such securities except
as may arise from the Foreign Sub-Custodian's own negligence or willful
misconduct;
(vii) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions
for conversion contained in such securities, or pursuant to any deposit
agreement;
(viii) in the case of warrants, rights or similar foreign securities,
the surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or temporary
securities for definitive securities;
(ix) for delivery as security in connection with any borrowing by the
Portfolios requiring a pledge of assets by the Portfolios;
(x) for delivery as initial or variation margin in connection with
futures or options on futures contracts entered into by the Fund on
behalf of the Portfolio;
(xi) in connection with the lending of foreign securities; and
(xii) for any other purpose, but only upon receipt of Proper
Instructions specifying the foreign securities to be delivered and
naming the person or persons to whom delivery of such securities shall
be made.
5.4.2 PAYMENT OF PORTFOLIO MONIES. Upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out, or direct the respective Foreign Sub-Custodian or the
respective Foreign Securities System to pay out, monies of a Portfolio in the
following cases only:
(i) upon the purchase of foreign securities for the Portfolio, unless
otherwise directed by Proper Instructions, by (A) delivering money to
the seller thereof or to a dealer therefor (or an agent for such seller
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or dealer) against expectation of receiving later delivery of such
foreign securities; or (B) in the case of a purchase effected through a
Foreign Securities System, in accordance with the rules governing the
operation of such Foreign Securities System;
(ii) in connection with the conversion, exchange or surrender of
foreign securities of the Portfolio;
(iii) for the payment of any expense or liability of the Portfolio,
including but not limited to the following payments: interest, taxes,
investment advisory fees, transfer agency fees, fees under this
Agreement, legal fees, accounting fees, and other operating expenses;
(iv) for the purchase or sale of foreign exchange or foreign exchange
contracts for the Portfolio, including transactions executed with or
through the Custodian or its Foreign Sub-Custodians;
(v) for delivery as initial or variation margin in connection with
futures or options on futures contracts entered into by the Fund on
behalf of the Portfolio;
(vi) for payment of part or all of the dividends received in respect of
securities sold short;
(vii) in connection with the borrowing or lending of foreign
securities; and
(viii) for any other purpose, but only upon receipt of Proper
Instructions specifying the amount of such payment and naming the
person or persons to whom such payment is to be made.
5.4.3 MARKET CONDITIONS. Notwithstanding any provision of this
Agreement to the contrary, settlement and payment for Foreign Assets received
for the account of the Portfolios and delivery of Foreign Assets maintained for
the account of the Portfolios may be effected in accordance with the customary
established securities trading or processing practices and procedures in the
country or market in which the transaction occurs, including, without
limitation, delivering Foreign Assets to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) with the expectation of
receiving later payment for such Foreign Assets from such purchaser or dealer.
The Custodian shall provide to the Board the information with respect to custody
and settlement practices in countries in which the Custodian employs a Foreign
Sub-Custodian described on Schedule C hereto at the time or times set forth on
such Schedule. The Custodian may revise Schedule C from time to time, provided
that no such revision shall result in the Board being provided with
substantively less information than had been previously provided hereunder.
SECTION 5.5 REGISTRATION OF FOREIGN SECURITIES. The foreign securities
maintained in the custody of a Foreign Sub-Custodian (other than bearer
securities) shall be registered in the name of the applicable Portfolio or in
the name of the Custodian or in the name of any Foreign Sub-Custodian or in the
name of any nominee of the foregoing, and the Fund on behalf of such Portfolio
agrees to hold any such nominee harmless from any liability as a holder of
record of such foreign securities. The Custodian or a Foreign Sub-Custodian
shall not be obligated to accept securities on behalf of a Portfolio under the
terms of this Agreement unless the form of such securities and the manner in
which they are delivered are in accordance with reasonable market practice.
SECTION 5.6 BANK ACCOUNTS. The Custodian shall identify on its books as
belonging to the Fund cash (including cash denominated in foreign currencies)
deposited with the Custodian. Where the Custodian is unable to maintain, or
market practice does not facilitate the maintenance of, cash on the books of the
Custodian, a bank account or bank accounts shall be opened and maintained
outside the United States on behalf of a Portfolio with a Foreign Sub-Custodian.
All accounts referred to in this Section shall be subject only to draft or order
by the Custodian (or, if applicable, such Foreign Sub-Custodian) acting pursuant
to the terms of this Agreement to hold cash received by or from or for the
account of the Portfolio. Cash maintained on the books of the Custodian
(including its branches, subsidiaries and affiliates), regardless of currency
denomination, is maintained in bank accounts established under, and subject to
the laws of, The Commonwealth of Massachusetts.
SECTION 5.7 COLLECTION OF INCOME. The Custodian shall use reasonable commercial
efforts to collect all income and other payments with respect to the Foreign
Assets held hereunder to which the Portfolios shall be entitled and shall credit
such income, as collected, to the applicable Portfolio. In the event that
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extraordinary measures are required to collect such income, the Fund and the
Custodian shall consult as to such measures and as to the compensation and
expenses of the Custodian relating to such measures.
SECTION 5.8 SHAREHOLDER RIGHTS. With respect to the foreign securities held
pursuant to this Section 4, the Custodian will use reasonable commercial efforts
to facilitate the exercise of voting and other shareholder rights, subject
always to the laws, regulations and practical constraints that may exist in the
country where such securities are issued. The Fund acknowledges that local
conditions, including lack of regulation, onerous procedural obligations, lack
of notice and other factors may have the effect of severely limiting the ability
of the Fund to exercise shareholder rights.
SECTION 5.9 COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The Custodian shall
transmit promptly to the Fund written information with respect to materials
received by the Custodian via the Foreign Sub-Custodians from issuers of the
foreign securities being held for the account of the Portfolios (including,
without limitation, pendency of calls and maturities of foreign securities and
expirations of rights in connection therewith). With respect to tender or
exchange offers, the Custodian shall transmit promptly to the Fund written
information with respect to materials so received by the Custodian from issuers
of the foreign securities whose tender or exchange is sought or from the party
(or its agents) making the tender or exchange offer. The Custodian shall not be
liable for any untimely exercise of any tender, exchange or other right or power
in connection with foreign securities or other property of the Portfolios at any
time held by it unless (i) the Custodian or the respective Foreign Sub-Custodian
is in actual possession of such foreign securities or property and (ii) the
Custodian receives Proper Instructions with regard to the exercise of any such
right or power, and both (i) and (ii) occur at least three business days prior
to the date on which the Custodian is to take action to exercise such right or
power.
SECTION 5.10 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to
which the Custodian employs a Foreign Sub-Custodian shall, to the extent
possible, require the Foreign Sub-Custodian to exercise reasonable care in the
performance of its duties, and to indemnify, and hold harmless, the Custodian
from and against any loss, damage, cost, expense, liability or claim arising out
of or in connection with the Foreign Sub-Custodian's performance of such
obligations. At the Fund's election, the Portfolios shall be entitled to be
subrogated to the rights of the Custodian with respect to any claims against a
Foreign Sub-Custodian as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Portfolios have not been made
whole for any such loss, damage, cost, expense, liability or claim.
SECTION 5.1 TAX LAW. The Custodian shall have no responsibility or liability for
any obligations now or hereafter imposed on the Fund, the Portfolios or the
Custodian as custodian of the Portfolios by the tax law of the United States or
of any state or political subdivision thereof. It shall be the responsibility of
the Fund to notify the Custodian of the obligations imposed on the Fund with
respect to the Portfolios or the Custodian as custodian of the Portfolios by the
tax law of countries other than those mentioned in the above sentence, including
responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax law shall be to use
reasonable efforts to assist the Fund with respect to any claim for exemption or
refund under the tax law of countries for which the Fund has provided such
information.
SECTION 5.12 LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts
or omissions of a Foreign Sub- Custodian to the same extent as set forth with
respect to sub-custodians generally in the Agreement and, regardless of whether
assets are maintained in the custody of a Foreign Sub-Custodian or a Foreign
Securities System, the Custodian shall not be liable for any loss, damage, cost,
expense, liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism, or any other loss where the
Sub-Custodian has otherwise acted with reasonable care.
III. Except as specifically superseded or modified herein, the terms and
provisions of the Agreement shall continue to apply with full force and effect.
In the event of any conflict between the terms of the Agreement prior to this
Amendment and this Amendment, the terms of this Amendment shall prevail. If the
Custodian is delegated the responsibilities of FCM pursuant to the terms of
Section 4 hereof, in the event of any conflict between the provisions of
Sections 4 and 5 hereof, the provisions of Section 4 shall prevail.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed in its name and behalf by its duly authorized representative as of the
date first above written.
STATE STREET BANK AND TRUST SENTINEL GROUP FUNDS, INC.
COMPANY
By: /s/ XXXXXX NOVELLANT By: /S/ XXX XXXXXX
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Title: Title: Treasurer and Vice President
SENTINEL PENNSYLVANIA TAX-FREE
TRUST
By: /S/ XXX XXXXXX
---------------
Title: Treasurer and Vice President
SENTINEL VARIABLE PRODUCTS TRUST
By: /S/ XXX XXXXXX
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Title: Treasurer and Vice President
