Exhibit 2(j)
FORM OF
CUSTODIAN SERVICES AGREEMENT
THIS AGREEMENT is made as of , 2007 by and between PFPC TRUST COMPANY, a
limited purpose trust company incorporated under the laws of Delaware ("PFPC
Trust"), and MAGNETAR SPECTRUM FUND, a Delaware business trust (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as a closed-end, non-diversified
management investment company under the Investment Company Act of 1940 (the
"1940 Act"); and
WHEREAS, the Fund wishes to retain PFPC Trust to provide custodian
services, and PFPC Trust wishes to furnish custodian services, either directly
or through an affiliate or affiliates, as more fully described herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Definitions. As used in This Agreement:
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(c) "Authorized Person" means any officer of the Fund and any other
person authorized by the Fund to give Oral or Written Instructions
on behalf of the Fund. An Authorized Person's scope of authority may
be limited by setting forth such limitation in a written document
signed by both parties hereto.
(d) "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 registered with the SEC
under the 1934 Act.
(e) "Change of Control" means a change in ownership or control (not
including transactions between wholly owned direct or indirect
subsidiaries of a common parent) of 25% or more of the beneficial
ownership of the shares of common stock or shares of beneficial
interest of an entity or its parent(s).
(f) "Oral Instructions" mean oral instructions received by PFPC Trust
from an Authorized Person or from a person reasonably believed by
PFPC Trust to be an Authorized Person. PFPC Trust may, in its sole
discretion in each separate instance, consider and rely upon
instructions it receives from an Authorized Person via electronic
mail as Oral Instructions.
(g) "Manager" means Magnetar Financial LLC, the investment adviser to
the Fund.
(h) "PFPC Trust" means PFPC Trust Company or a subsidiary or affiliate
of PFPC Trust Company.
(i) "SEC" means the Securities and Exchange Commission.
(j) "Securities Laws" mean the 1933 Act, the 1934 Act and the 1940 Act.
(k) "Shares" mean the shares of beneficial interest of any series or
class of the Fund.
(l) "Property" means:
(i) any and all securities and other investment items which the
Fund may from time to time deposit, or cause to be deposited,
with PFPC Trust or which PFPC Trust may from time to time hold
for the Fund;
(ii) all income in respect of any of such securities or other
investment items;
(iii) all proceeds of the sale of any of such securities or
investment items; and
(iv) all proceeds of the sale of securities issued by the Fund,
which are received by PFPC Trust from time to time, from or on
behalf of the Fund.
(m) "Written Instructions" mean (i) written instructions signed by two
Authorized
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Persons (or persons reasonably believed by PFPC Trust to be
Authorized Persons) and received by PFPC Trust or (ii) trade
instructions transmitted by means of an electronic transaction
reporting system which requires the use of a password or other
authorized identifier in order to gain access. The instructions may
be delivered electronically (with respect to sub-item (ii) above) or
by hand, mail or facsimile sending device.
2. Appointment. The Fund hereby appoints PFPC Trust to provide custodian
services to the Fund as set forth herein, on behalf of each of its
investment portfolios (each, a "Portfolio"), and PFPC Trust accepts such
appointment and agrees to furnish such services. PFPC Trust shall not
bear, or otherwise be responsible for, any fees, costs or expenses charged
by any third party service providers engaged by the Fund or by any other
third party service provider to the Fund.
3. Instructions.
(a) Unless otherwise provided in this Agreement, PFPC Trust shall act
only upon Oral Instructions or Written Instructions.
(b) PFPC Trust shall be entitled to rely upon any Oral Instruction or
Written Instruction it receives pursuant to this Agreement. PFPC
Trust may assume that any Oral Instructions or Written Instructions
received hereunder are not in any way inconsistent with the
provisions of organizational documents of the Fund or of any vote,
resolution or proceeding of the Fund's Board of Trustees or of the
Fund's shareholders, unless and until PFPC Trust receives Written
Instructions to the contrary.
(c) The Fund agrees to forward to PFPC Trust Written Instructions
confirming Oral
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Instructions (except where such Oral Instructions are given by PFPC
Trust or its affiliates) so that PFPC Trust receives the Written
Instructions by the close of business on the same day that such Oral
Instructions are received. The fact that such confirming Written
Instructions are not received by PFPC Trust or differ from the Oral
Instructions shall in no way invalidate the transactions or
enforceability of the transactions authorized by the Oral
Instructions or PFPC Trust's ability to rely upon such Oral
Instructions.
4. Right to Receive Advice.
(a) Advice of the Fund. If PFPC Trust is in doubt as to any action it
should or should not take, PFPC Trust may request directions or
advice, including Oral Instructions or Written Instructions, from
the Fund.
(b) Advice of Counsel. If PFPC Trust shall be in doubt as to any
question of law pertaining to any action it should or should not
take, PFPC Trust may request advice from counsel of its own choosing
(who may be counsel for the Fund, the Fund's investment adviser or
PFPC Trust, at the option of PFPC Trust).
(c) Conflicting Advice. In the event of a conflict between directions or
advice or Oral Instructions or Written Instructions PFPC Trust
receives from the Fund, and the advice it receives from counsel,
PFPC Trust may rely upon and follow the advice of counsel, after
PFPC Trust has discussed the matter with the Fund and the Fund's
counsel and the conflict is not resolved.
(d) Protection of PFPC Trust. PFPC Trust shall be indemnified by the
Fund and without liability for any action PFPC Trust takes or does
not take in reliance upon directions or advice or Oral Instructions
or Written Instructions PFPC Trust
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receives from or on behalf of the Fund or from counsel and which
PFPC Trust believes, in good faith, to be consistent with those
directions or advice or Oral Instructions or Written Instructions.
Nothing in this section shall be construed so as to impose an
obligation upon PFPC Trust to seek such directions or advice or Oral
Instructions or Written Instructions.
5. Records; Visits. The books and records pertaining to the Fund and any
Portfolio, which are in the possession or under the control of PFPC Trust,
shall be the property of the Fund. Such books and records shall be
prepared and maintained as required by the 1940 Act and other applicable
securities laws, rules and regulations. The Fund and Authorized Persons
shall have access to such books and records at all times during PFPC
Trust's normal business hours. Upon the reasonable request of the Fund,
copies of any such books and records shall be provided by PFPC Trust to
the Fund or to an authorized representative of the Fund, at the Fund's
expense.
6. Confidentiality. Each party shall keep confidential any information
relating to the other party's business ("Confidential Information").
Confidential Information shall include (a) any data or information that is
competitively sensitive material, and not generally known to the public,
including, but not limited to, information about product plans, marketing
strategies, finances, operations, customer relationships, customer
profiles, customer lists, sales estimates, business plans, and internal
performance results relating to the past, present or future business
activities of the Fund or PFPC Trust, their respective subsidiaries and
affiliated companies; (b) any scientific or technical information, design,
process, procedure, formula, or improvement that is commercially valuable
and secret in the sense that its confidentiality affords the Fund or PFPC
Trust a competitive advantage
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over its competitors; (c) all confidential or proprietary concepts,
documentation, reports, data, specifications, computer software, source
code, object code, flow charts, databases, inventions, know-how, and trade
secrets, whether or not patentable or copyrightable; and (d) anything
designated as confidential. Notwithstanding the foregoing, information
shall not be Confidential Information and shall not be subject to such
confidentiality obligations if: (a) it is already known to the receiving
party at the time it is obtained; (b) it is or becomes publicly known or
available through no wrongful act of the receiving party; (c) it is
rightfully received from a third party who, to the best of the receiving
party's knowledge, is not under a duty of confidentiality; (d) it is
released by the protected party to a third party without restriction; (e)
it is requested or required to be disclosed by the receiving party
pursuant to a court order, subpoena, governmental or regulatory agency
request or law (provided the receiving party will provide the other party
written notice of the same, to the extent such notice is permitted); (f)
release of such information by PFPC Trust is necessary or desirable in
connection with the provision of services under this Agreement; (g) it is
Fund information provided by PFPC Trust in connection with an independent
third party compliance or other review so long as such independent third
party has agreed to maintain such Fund information confidentially; (h) it
is relevant to the defense of any claim or cause of action asserted
against the receiving party; or (i) it has been or is independently
developed or obtained by the receiving party. The provisions of this
Section 6 shall survive termination of this Agreement for a period of
three (3) years after such termination.
7. Cooperation with Accountants. PFPC Trust shall cooperate with the Fund's
independent public accountants and shall take all reasonable action to
make any
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requested information available to such accountants as reasonably
requested by the Fund.
8. Cooperation with Fund's Chief Compliance Officer. In connection with the
Fund's obligations under rule 38a-1 of the 1940 Act, PFPC Trust or its
affiliates shall (i) provide, via internet access or otherwise, the
policies and procedures related to the services that PFPC Trust is
required to perform pursuant to this Agreement and summaries thereof; (ii)
provide notification (via e-mail or otherwise) of updates to the
aforementioned policies and procedures; and (iii) upon request provide
periodic certifications with respect to the aforementioned policies and
procedures.
9. PFPC System. PFPC Trust shall retain title to and ownership of any and all
data bases, computer programs, screen formats, report formats, interactive
design techniques, derivative works, inventions, discoveries, patentable
or copyrightable matters, concepts, expertise, patents, copyrights, trade
secrets, and other related legal rights utilized by PFPC Trust in
connection with the services provided by PFPC Trust to the Fund.
10. Disaster Recovery. PFPC Trust shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provisions for emergency use of electronic data processing equipment to
the extent appropriate equipment is available. In the event of equipment
failures, PFPC Trust shall, at no additional expense to the Fund, take
reasonable steps to minimize service interruptions. Provided that PFPC
Trust has taken such reasonable steps, PFPC Trust shall have no liability
with respect to the loss of data or service interruptions caused by
equipment failure provided such loss or interruption is not caused by PFPC
Trust's own willful misfeasance, fraud, bad faith, gross negligence or
reckless disregard of its duties or obligations under this Agreement.
11. Compensation.
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(a) As compensation for custody services rendered by PFPC Trust during
the term of this Agreement, the Fund, on behalf of each of the
Portfolios, will pay to PFPC Trust a fee or fees as may be agreed to
in writing from time to time by the Fund and PFPC Trust. The Fund
acknowledges that PFPC Trust may receive float benefits in
connection with maintaining certain accounts required to provide
services under this Agreement.
(b) The undersigned hereby represents and warrants to PFPC Trust that
(i) the terms of this Agreement, (ii) the fees and expenses
associated with this Agreement, and (iii) any benefits accruing to
PFPC Trust or to the adviser or sponsor to the Fund in connection
with this Agreement, including but not limited to any fee waivers,
conversion cost reimbursements, up front payments, signing payments
or periodic payments made or to be made by PFPC Trust to such
adviser or sponsor or any affiliate of the Fund relating to this
Agreement have been fully disclosed to the Board of Trustees of the
Fund and that, if required by applicable law, such Board of Trustees
has approved or will approve the terms of this Agreement, any such
fees and expenses, and any such benefits.
(c) Notwithstanding the limitation of liability provisions of this
agreement or the termination of this agreement, the Fund shall
remain responsible for paying to PFPC Trust the fees set forth in
the applicable fee letter.
12. Standard of Care/Limitations of Liability.
(a) PFPC Trust shall be obligated to exercise care and diligence in the
performance of its duties hereunder. Subject to the terms of this
Section 12, PFPC Trust shall be liable to the Fund (or any person or
entity claiming through the Fund) for
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damages only to the extent caused by PFPC Trust's own willful
misfeasance, bad faith, negligence or reckless disregard of its
duties under this Agreement.
(b) Notwithstanding anything in this Agreement to the contrary (other
than as specifically provided in Section 14(h)(ii)(B)(4) and Section
14(h)(iii)(A) of this Agreement), the Fund shall be responsible for
all filings, tax returns and reports on any transactions undertaken
pursuant to this Agreement, or in respect of the Property or any
collections undertaken pursuant to this Agreement, which may be
requested by any relevant authority. In addition, the Fund shall be
responsible for the payment of all taxes and similar items
(including without limitation penalties and interest related
thereto).
(c) To the extent caused by PFPC Trust's own negligence, PFPC Trust's
cumulative liability to the Fund and any person or entity claiming
through the Fund for any loss, claim, suit, controversy, breach or
damage of any nature whatsoever (including but not limited to those
arising out of or related to this Agreement) and regardless of the
form of action or legal theory ("Loss") shall not exceed $1,000,000.
(d) PFPC Trust shall not be liable for damages (including without
limitation damages caused by delays, failure, errors, interruption
or loss of data) occurring directly or indirectly by reason of
circumstances beyond its reasonable control, including without
limitation acts of God; action or inaction of civil or military
authority; national emergencies; public enemy; war; terrorism; riot;
fire; flood; catastrophe; sabotage; epidemics; labor disputes; civil
commotion; interruption, loss or malfunction of utilities,
transportation, computer or communications capabilities;
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insurrection; elements of nature; non-performance by a third party;
failure of the mails; or functions or malfunctions of the internet,
firewalls, encryption systems or security devices caused by any of
the above.
(e) PFPC Trust shall not be under any duty or obligation to inquire into
and shall not be liable for the validity or invalidity, authority or
lack thereof, or truthfulness or accuracy or lack thereof, of any
instruction, direction, notice, instrument or other information
which PFPC Trust reasonably believes to be genuine. PFPC Trust shall
not be liable for any damages that are caused by actions or
omissions taken by PFPC Trust in accordance with Written
Instructions or advice of counsel. PFPC Trust shall not be liable
for any damages arising out of any action or omission to act by any
prior service provider of the Fund or for any failure to discover
any such error or omission.
(f) Neither PFPC Trust nor its affiliates shall be liable for any
consequential, incidental, exemplary, punitive, special or indirect
damages, whether or not the likelihood of such damages was known by
PFPC Trust or its affiliates.
(g) No party may assert a cause of action against PFPC Trust or any of
its affiliates that allegedly occurred more than twenty-four (24)
months immediately prior to the filing of the suit (or, if
applicable, commencement of arbitration proceedings) alleging such
cause of action.
(h) Each party shall have a duty to mitigate damages for which the other
party may become responsible.
(i) The Fund shall be responsible for appointing its own Anti-Money
Laundering Reporting Officer and under no circumstances shall PFPC
Trust, PFPC Trust's
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affiliates, or any PFPC Trust's employees, officers or directors, be
responsible or liable for the Fund's compliance with any anti-money
laundering laws and regulations of any jurisdiction in which the
Fund operates.
(j) This Section 12 shall survive termination of this Agreement.
13. Indemnification. The Fund, agrees to indemnify, defend and hold harmless
PFPC Trust and its affiliates and their respective directors, trustees,
officers, agents and employees ("PFPC Indemnified Party") from all claims,
suits, actions, damages, losses, liabilities, obligations, costs and
reasonable expenses (including attorneys' fees and court costs, travel
costs and other reasonable out-of-pocket costs related to dispute
resolution) ("Losses") arising directly or indirectly from any action
taken or omitted to be taken by PFPC Trust which PFPC Trust takes in good
faith in connection with the provision of services to the Fund. No PFPC
Indemnified Party shall be indemnified by the Fund against any Loss caused
by a PFPC Indemnified Party's own willful misfeasance, bad faith, gross
negligence or reckless disregard in the performance of PFPC Trust's
activities under this Agreement.
This Section 13 shall survive termination of this Agreement.
14. Description of Services.
(a) Delivery of the Property. The Fund will deliver or arrange for
delivery to PFPC Trust, all the Property owned by the Portfolios,
including cash received as a result of the distribution of Shares,
during the term of this Agreement. PFPC Trust will not be
responsible for any assets until actual receipt.
(b) Receipt and Disbursement of Money. PFPC Trust, acting upon Written
Instructions, shall open and maintain a separate account for each
separate
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Portfolio of the Fund (each an "Account") and shall maintain in the
Account of a particular Portfolio all cash and other assets received
from or for the Fund specifically designated to such Account.
PFPC Trust shall make cash payments from or for the Account of a
Portfolio only for:
(i) purchases of securities in the name of a Portfolio, PFPC
Trust, PFPC Trust's nominee or a sub-custodian or nominee
thereof as provided in sub-section (j) and for which PFPC
Trust has received a copy of the broker's or dealer's
confirmation or payee's invoice, as appropriate;
(ii) redemption of Shares of the Fund upon receipt of Written
Instructions;
(iii) payment of, subject to Written Instructions, interest,
taxes (provided that tax which PFPC Trust considers is
required to be deducted or with held "at source" will be
governed by Section 13(h)(iii)(B) of this Agreement),
administration, accounting, distribution, advisory and
management fees which are to be borne by a Portfolio;
(iv) payment to, subject to receipt of Written Instructions,
the Fund's transfer agent, as agent for the members, of an
amount equal to the amount of dividends and distributions
stated in the Written Instructions to be distributed in
cash by the transfer agent to members, or, in lieu of
paying the Fund's transfer agent, PFPC Trust may arrange
for the direct payment of cash dividends and distributions
to members in accordance with procedures mutually agreed
upon from time to time by and among the Fund, PFPC Trust
and the Fund's transfer agent;
(v) payments, upon receipt of Written Instructions, in
connection with the conversion, exchange or surrender of
securities owned or subscribed to by the Fund and held by
or delivered to PFPC Trust;
(vi) payments of the amounts of dividends received with respect
to securities sold short;
(vii) payments to PFPC Trust for its services hereunder;
(viii) payments made to a sub-custodian pursuant to provisions in
sub-section (c) of this Section; and
(ix) other payments, upon Written Instructions.
PFPC Trust is hereby authorized to endorse and collect all checks, drafts
or other orders for the payment of money received as custodian for the
Accounts.
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(c) Receipt of Securities; Subcustodians.
(i) PFPC Trust shall hold all securities received by it for the
Accounts in a separate account that physically segregates such
securities from those of any other persons, firms or
corporations, except for securities held in a Book-Entry
System or through a sub-custodian or depository. All such
securities shall be held or disposed of only upon Written
Instructions or otherwise pursuant to the terms of this
Agreement. PFPC Trust shall have no power or authority to
assign, hypothecate, pledge or otherwise dispose of any such
securities or investment, except upon the express terms of
this Agreement or upon Written Instructions authorizing the
transaction. In no case may any member of the Fund's
directors, or any officer, employee or agent of the Fund
withdraw any securities.
At PFPC Trust's own expense and for its own convenience, PFPC
Trust may enter into sub-custodian agreements with other banks
or trust companies to perform duties described in this
sub-section (c) with respect to domestic assets. Such bank or
trust company shall have aggregate capital, surplus and
undivided profits, according to its last published report, of
at least one million dollars ($1,000,000), if it is a
subsidiary or affiliate of PFPC Trust, or at least twenty
million dollars ($20,000,000) if such bank or trust company is
not a subsidiary or affiliate of PFPC Trust. In addition, such
bank or trust company must be qualified to act as custodian
and agree to comply with the relevant provisions of applicable
rules and regulations. Any such arrangement will not be
entered into without prior written notice to the Fund (or as
otherwise provided in the 1940 Act).
In addition, PFPC Trust may enter into arrangements with
sub-custodians with respect to services regarding foreign
assets. Any such arrangement will not be entered into without
prior written notice to the Fund (or as otherwise provided in
the 1940 Act).
Sub-custodians utilized by PFPC Trust may be subsidiaries or
affiliates of PFPC Trust, and such entities will be
compensated for their services at such rates as are agreed
between the entity and PFPC Trust. PFPC Trust shall remain
responsible for the acts and omissions of any sub-custodian or
domestic agent chosen or approved by PFPC Trust under the
terms of this sub-section (c) to the same extent that PFPC
Trust is responsible for its own acts and omissions under this
Agreement.
(d) Transactions Requiring Instructions. Upon receipt of Oral
Instructions or Written Instructions and not otherwise, PFPC Trust
shall:
(i) deliver any securities held for a Portfolio against the
receipt of payment
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for the sale of such securities or otherwise in accordance
with standard market practice;
(ii) execute and deliver to such persons as may be designated
in such Oral Instructions or Written Instructions,
proxies, consents, authorizations, and any other
instruments whereby the authority of a Portfolio as owner
of any securities may be exercised;
(iii) deliver any securities to the issuer thereof, or its
agent, when such securities are called, redeemed, retired
or otherwise become payable at the option of the holder;
provided that, in any such case, the cash or other
consideration is to be delivered to PFPC Trust;
(iv) deliver any securities held for a Portfolio against
receipt of other securities or cash issued or paid in
connection with the liquidation, reorganization,
refinancing, tender offer, merger, consolidation or
recapitalization of any corporation, or the exercise of
any conversion privilege;
(v) deliver any securities held for a Portfolio 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, and receive and hold under the terms
of this Agreement such certificates of deposit, interim
receipts or other instruments or documents as may be
issued to it to evidence such delivery;
(vi) make such transfer or exchanges of the assets of the
Portfolios and take such other steps as shall be stated in
said Oral Instructions or Written Instructions to be for
the purpose of effectuating a duly authorized plan of
liquidation, reorganization, merger, consolidation or
recapitalization of the Fund;
(vii) release securities belonging to a Portfolio to any bank or
trust company for the purpose of a pledge or hypothecation
to secure any loan incurred by the Fund on behalf of that
Portfolio; provided, however, that securities shall be
released only upon payment to PFPC Trust 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 repay such loan upon
redelivery to it of the securities pledged or hypothecated
therefor and upon surrender of the note or notes
evidencing the loan;
(viii) release and deliver securities owned by a Portfolio in
connection with any repurchase agreement entered into by
the Fund on behalf of that Portfolio, but only on receipt
of payment therefor; and pay out monies of the Fund in
connection with such repurchase agreements, but only upon
the delivery of the securities;
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(ix) release and deliver or exchange securities owned by the
Fund in connection with any conversion of such securities,
pursuant to their terms, into other securities;
(x) release and deliver securities to a broker in connection
with the broker's custody of margin collateral relating to
futures and options transactions;
(xi) release and deliver securities owned by the Fund for the
purpose of redeeming in kind shares of the Fund upon
delivery thereof to PFPC Trust; and
(xii) release and deliver or exchange securities owned by the
Fund for other purposes.
PFPC Trust must also receive a certified resolution
describing the nature of the corporate purpose and the
name and address of the person(s) to whom delivery shall
be made when such action is pursuant to sub-paragraph d.
(e) Use of Book-Entry System or Other Depository. PFPC Trust will
deposit in Book-Entry Systems and other depositories all securities
belonging to the Portfolios eligible for deposit therein and will
utilize Book-Entry Systems and other depositories to the extent
possible in connection with settlements of purchases and sales of
securities by the Portfolios, and deliveries and returns of
securities loaned, subject to repurchase agreements or used as
collateral in connection with borrowings. PFPC Trust shall continue
to perform such duties until it receives Written Instructions or
Oral Instructions authorizing contrary actions. Notwithstanding
anything in this Agreement to the contrary, PFPC Trust's use of a
Book-Entry System shall comply with the requirements of Rule 17f-4
under the 1940 Act.
PFPC Trust shall administer a Book-Entry System or other depository as
follows:
(i) With respect to securities of each Portfolio which are
maintained in a Book-Entry System or another depository,
the records of PFPC Trust shall identify by book-entry or
otherwise those securities as belonging to each
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Portfolio.
(ii) Assets of each Portfolio deposited in a Book-Entry System
or another depository will (to the extent consistent with
applicable law and standard practice) at all times be
segregated from any assets and cash controlled by PFPC
Trust in other than a fiduciary or custodian capacity but
may be commingled with other assets held in such
capacities.
PFPC Trust will provide the Fund with such reports on its own system
of internal control as the Fund may reasonably request from time to
time.
(f) Registration of Securities. All securities held for a Portfolio
which are issued or issuable only in bearer form, except such
securities maintained in the Book-Entry System or in another
depository, shall be held by PFPC Trust in bearer form; all other
securities maintained for a Portfolio may be registered in the name
of the Fund on behalf of that Portfolio, PFPC Trust, a Book-Entry
System, another depository, a sub-custodian, or any duly appointed
nominee of the Fund, PFPC Trust, Book-Entry System, depository or
sub-custodian. The Fund reserves the right to instruct PFPC Trust as
to the method of registration and safekeeping of the securities of
the Fund. The Fund agrees to furnish to PFPC Trust appropriate
instruments to enable PFPC Trust to maintain or deliver in proper
form for transfer, or to register in the name of its nominee or in
the name of the Book-Entry System or in the name of another
appropriate entity, any securities which it may maintain for the
Accounts. With respect to uncertificated securities which are
registered in the name of the Fund or a Portfolio (or a nominee
thereof), PFPC Trust will reflect such securities on its records
based upon the holdings information provided to it by the issuer of
such securities, but notwithstanding anything in this Agreement to
the contrary PFPC Trust shall not be obligated to
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safekeep such securities or to perform other duties with respect to
such securities other than to make payment for the purchase of such
securities upon receipt of Oral or Written Instructions, accept in
sale proceeds received by PFPC Trust upon the sale of such
securities of which PFPC Trust is informed pursuant to Oral or
Written Instructions, and accept in other distributions received by
PFPC Trust with respect to such securities or reflect on its records
any reinvested distributions with respect to such securities of
which it is informed by the issuer of the securities.
(g) Voting and Other Action. Neither PFPC Trust nor its nominee shall
vote any of the securities held pursuant to this Agreement by or for
the account of a Portfolio, except in accordance with Written
Instructions. PFPC Trust, directly or through the use of another
entity, shall execute in blank and promptly deliver all notices,
proxies and proxy soliciting materials received by PFPC Trust as
custodian of the Property to the registered holder of such
securities. If the registered holder is not the Fund on behalf of a
Portfolio, then Written Instructions or Oral Instructions must
designate the person who owns such securities.
(h) Transactions Not Requiring Instructions. Notwithstanding anything in
this Agreement requiring instructions in order to take a particular
action, in the absence of a contrary Written Instruction, PFPC Trust
is authorized to take the following actions without the need for
instructions:
(i) Collection of Income and Other Payments.
(A) collect and receive for the account of each Portfolio,
all income, dividends, distributions, coupons, option
premiums, other payments and similar items, included or
to be included in the Property, and, in addition,
promptly advise each Portfolio of such
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receipt and credit such income to each Portfolio's
custodian account;
(B) endorse and deposit for collection, in the name of the
Fund, checks, drafts, or other orders for the payment of
money;
(C) receive and hold for the account of each Portfolio all
securities received as a distribution on the Portfolio's
securities 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
securities belonging to a Portfolio and held by PFPC
Trust hereunder;
(D) present for payment and collect the amount payable upon
all securities which may mature or be called, redeemed,
retired, or otherwise become payable (on a mandatory
basis) on the date such securities become payable; and
(E) 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
instruments.
(ii) Miscellaneous Transactions.
(A) PFPC Trust is authorized to deliver or cause to be
delivered Property against payment or other
consideration or written receipt therefor in the
following cases:
(1) for examination by a broker or dealer selling for
the account of a Portfolio in accordance with
street delivery custom;
(2) for the exchange of interim receipts or temporary
securities for definitive securities; and
(3) for transfer of securities into the name of the
Fund on behalf of a Portfolio or PFPC Trust or a
sub-custodian or a nominee of one of the
foregoing, 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 PFPC Trust.
18
(B) PFPC Trust shall:
(1) pay all income items held by it which call for
payment upon presentation and hold the cash
received by it upon such payment for the account
of each Portfolio;
(2) collect interest and cash dividends received, with
notice to the Fund, to the account of each
Portfolio;
(3) hold for the account of each Portfolio all stock
dividends, rights and similar securities issued
with respect to any securities held by PFPC Trust;
and
(4) subject to receipt of such documentation and
information as PFPC Trust may request, execute as
agent on behalf of the Fund all necessary
ownership certificates required by a national
governmental taxing authority or under the laws of
any U.S. state now or hereafter in effect,
inserting the Fund's name, on behalf of a
Portfolio, on such certificate as the owner of the
securities covered thereby, to the extent it may
lawfully do so.
(iii) Other Matters.
(A) Subject to receipt of such documentation and information
as PFPC Trust may request, PFPC Trust will, in such
jurisdictions as PFPC Trust may agree from time to time,
seek to reclaim or obtain a reduction with respect to
any withholdings or other taxes relating to assets
maintained hereunder (provided that PFPC Trust will not
be liable for failure to obtain any particular relief in
a particular jurisdiction); and
(B) PFPC Trust is authorized to deduct or withhold any sum
in respect of tax which PFPC Trust considers is required
to be deducted or withheld "at source" by any relevant
law or practice.
(i) Segregated Accounts.
(i) PFPC Trust shall upon receipt of Written Instructions or
Oral Instructions establish and maintain segregated
accounts on its records for and on behalf of each
Portfolio. Such accounts may be used to transfer cash
and securities, including securities in a Book-Entry
System or other depository:
(A) for the purposes of compliance by the Fund with
the procedures required by a securities or option
exchange, providing such procedures comply with
the 1940 Act and any releases of the SEC
19
relating to the maintenance of segregated accounts
by registered investment companies; and
(B) upon receipt of Written Instructions, for other
purposes.
(ii) PFPC Trust shall arrange for the establishment of XXX
custodian accounts for such members holding Shares
through XXX accounts, in accordance with the Fund's
prospectuses, the Internal Revenue Code of 1986, as
amended (including regulations promulgated thereunder),
and with such other procedures as are mutually agreed
upon from time to time by and among the Fund, PFPC Trust
and the Fund's transfer agent.
(j) Purchases of Securities. PFPC Trust shall settle purchased
securities upon receipt of Oral Instructions or Written Instructions
that specify: (i) the name of the issuer and the title of the
securities, including CUSIP number if applicable;
(ii) the number of shares or the principal amount purchased and
accrued interest, if any;
(iii) the date of purchase and settlement;
(iv) the purchase price per unit;
(v) the total amount payable upon such purchase;
(vi) the Portfolio involved; and
(vii) the name of the person from whom or the broker through
whom the purchase was made. PFPC Trust shall upon receipt
of securities purchased by or for a Portfolio (or
otherwise in accordance with standard market practice) pay
out of the monies held for the account of the Portfolio
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 Instructions or Written Instructions.
(k) Sales of Securities. PFPC Trust shall settle sold securities upon
receipt of Oral Instructions or Written Instructions that specify:
(i) the name of the issuer and the title of the security,
including CUSIP number if applicable;
(ii) the number of shares or principal amount sold, and accrued
interest, if any;
20
(iii) the date of trade and settlement;
(iv) the sale price per unit;
(v) the total amount payable to the Fund upon such sale;
(vi) the name of the broker through whom or the person to whom
the sale was made;
(vii) the location to which the security must be delivered and
delivery deadline, if any; and
(viii) the Portfolio involved.
PFPC Trust shall deliver the securities upon receipt of the total amount
payable to the Portfolio upon such sale, provided that the total amount
payable is the same as was set forth in the Oral Instructions or Written
Instructions. Notwithstanding anything to the contrary in this Agreement,
PFPC Trust may accept payment in such form as is consistent with standard
industry practice and may deliver assets and arrange for payment in
accordance with standard market practice.
(l) Reports; Proxy Materials.
(i) PFPC Trust shall furnish to the Fund the following reports:
(A) such periodic and special reports as the Fund may
reasonably request;
(B) a monthly statement summarizing all transactions and
entries for the account of each Portfolio, listing each
portfolio security belonging to each Portfolio (with the
corresponding security identification number) held at
the end of such month and stating the cash balance of
each Portfolio at the end of such month.
(C) the reports required to be furnished to the Fund
pursuant to Rule 17f-4 of the 1940 Act; and
(D) such other information as may be agreed upon from
time to time between the Fund and PFPC Trust.
21
(ii) PFPC Trust shall transmit promptly to the Fund any proxy
statement, proxy material, notice of a call or conversion
or similar communication received by it as custodian of
the Property. PFPC Trust shall be under no other
obligation to inform the Fund as to such actions or
events. For clarification, upon termination of this
Agreement PFPC Trust shall have no responsibility to
transmit such material or to inform the Fund or any other
person of such actions or events.
(m) Crediting of Accounts. PFPC Trust may in its sole discretion credit
an Account with respect to income, dividends, distributions,
coupons, option premiums, other payments or similar items prior to
PFPC Trust's actual receipt thereof, and in addition PFPC Trust may
in its sole discretion credit or debit the assets in an Account on a
contractual settlement date with respect to any sale, exchange or
purchase applicable to the Account; provided that nothing herein or
otherwise shall require PFPC Trust to make any advances or to credit
any amounts until PFPC Trust's actual receipt thereof. If PFPC Trust
credits an Account with respect to (a) income, dividends,
distributions, coupons, option premiums, other payments or similar
items on a contractual payment date or otherwise in advance of PFPC
Trust's actual receipt of the amount due, (b) the proceeds of any
sale or other disposition of assets on the contractual settlement
date or otherwise in advance of PFPC Trust's actual receipt of the
amount due or (c) provisional crediting of any amounts due, and (i)
PFPC Trust is subsequently unable to collect full and final payment
for the amounts so credited within a reasonable time period using
reasonable efforts or (ii) pursuant to standard industry practice,
law or
22
regulation PFPC Trust is required to repay to a third party such
amounts so credited, or if any Property has been incorrectly
credited, PFPC Trust shall have the absolute right in its sole
discretion without demand to reverse any such credit or payment, to
debit or deduct the amount of such credit or payment from the
Account, and to otherwise pursue recovery of any such amounts so
credited from the Fund. The Fund hereby grants to PFPC Trust and to
each sub-custodian utilized by PFPC Trust in connection with
providing services to the Fund a first priority contractual
possessory security interest in and a right of setoff against the
assets maintained in an Account hereunder in the amount necessary to
secure the return and payment to PFPC Trust and to each such
sub-custodian of any advance or credit made by PFPC Trust and/or by
such sub-custodian (including charges related thereto) to such
Account. Notwithstanding anything in this Agreement to the contrary,
PFPC Trust shall be entitled to assign any rights it has under this
sub-section (m) to any sub-custodian utilized by PFPC Trust in
connection with providing services to the Fund which sub-custodian
makes any credits or advances with respect to the Fund.
(n) Collections. All collections of monies or other property in respect,
or which are to become part, of the Property (but not the
safekeeping thereof upon receipt by PFPC Trust) shall be at the sole
risk of the Fund. If payment is not received by PFPC Trust within a
reasonable time after proper demands have been made, PFPC Trust
shall notify the Fund in writing, including copies of all demand
letters, any written responses and memoranda of all oral responses
and shall await instructions from the Fund. PFPC Trust shall not be
obliged to take legal action
23
for collection unless and until reasonably indemnified to its
satisfaction. PFPC Trust shall also notify the Fund as soon as
reasonably practicable whenever income due on securities is not
collected in due course and shall provide the Fund with periodic
status reports of such income collected after a reasonable time.
(o) Excess Cash Sweep. PFPC Trust will, consistent with applicable law,
sweep any net excess cash balances daily into an investment vehicle
or other instrument designated in Written Instructions, so long as
the investment vehicle or instrument is acceptable to PFPC Trust,
subject to a fee, paid to PFPC Trust for such service, to be agreed
between the parties. Such investment vehicle or instrument may be
offered by an affiliate of PFPC Trust or by a PFPC Trust client and
PFPC Trust may receive compensation therefrom.
(p) Foreign Exchange. PFPC Trust and/or sub-custodians may enter into or
arrange foreign exchange transactions (at such rates as they may
consider appropriate) in order to facilitate transactions under this
Agreement, and such entities and/or their affiliates may receive
compensation in connection with such foreign exchange transactions.
15. Duration and Termination.
(a) This Agreement shall be effective on the date first written above
and unless terminated pursuant to its terms shall continue for a
period of one (1) years (the "Initial Term").
(b) Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of one (1) year ("Renewal
Term") each, unless the Fund or PFPC Trust provides written notice
to the other of its intent not to renew. Such
24
notice must be received not less than ninety (90) days prior to the
expiration of the Initial Term or the then current Renewal Term.
(c) In the event of termination, all expenses associated with movement
of records and materials and conversion into a mutually acceptable
format thereof to a successor custodian services agent will be borne
by the Fund and paid to PFPC Trust prior to any such conversion.
(d) In the event this Agreement is terminated (pending appointment of a
successor to PFPC Trust or vote of the shareholders of the Fund to
dissolve or to function without a custodian of its cash, securities
or other property), PFPC Trust shall not deliver cash, securities or
other property of the Portfolios to the Fund. It may deliver them to
a bank or trust company of PFPC Trust's choice, having aggregate
capital, surplus and undivided profits, as shown by its last
published report, of not less than twenty million dollars
($20,000,000), as a custodian for the Fund to be held under terms
similar to those of this Agreement. PFPC Trust shall not be required
to make any delivery or payment of assets upon termination until
full payment shall have been made to PFPC Trust of all of its fees,
compensation, costs and expenses (including without limitation fees
and expenses associated with deconversion or conversion to another
service provider and other trailing expenses incurred by PFPC
Trust). PFPC Trust shall have a first priority contractual
possessory security interest in and shall have a right of setoff
against the Property as security for the payment of such fees,
compensation, costs and expenses.
25
(e) If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other
party (the "Non-Defaulting Party") may give written notice thereof
to the Defaulting Party, and if such material breach shall not have
been remedied within thirty (30) days after such written notice is
given, then the Non-Defaulting Party may terminate this Agreement by
giving thirty (30) days written notice of such termination to the
Defaulting Party. In all cases, termination by the Non-Defaulting
Party shall not constitute a waiver by the Non-Defaulting Party of
any other rights it might have under this Agreement or otherwise
against the Defaulting Party.
(f) Notwithstanding anything contained in this Agreement to the
contrary, if in connection with a Change of Control the Fund gives
notice to PFPC Trust terminating it as the provider of any of the
services hereunder or if the Fund otherwise terminates, without
reasonable cause, this Agreement before the expiration of the
then-current Initial or Renewal Term ("Early Termination"):
(1) PFPC Trust shall, if requested by the Fund, make a good faith
effort to facilitate a conversion to the Fund's successor
service provider including providing such data as may be
required in mutually acceptable format; provided that PFPC
does not guarantee that it will be able to effect a conversion
on the date(s) requested by the Fund.
(2) Before the effective date of the Early Termination, the Fund
shall pay to PFPC Trust an amount equal to all fees and other
amounts ("Early Termination Fee") calculated as if PFPC Trust
were to provide all services hereunder until the expiration of
the then-current Initial or Renewal Term.
26
The Early Termination Fee shall be calculated using the
average of the monthly fees and other amounts due to PFPC
Trust under this Agreement during the last three calendar
months before the date of the notice of Early Termination (or
if not given the date it should have been given).
(3) The Fund expressly acknowledges and agrees that the Early
Termination Fee is not a penalty but reasonable compensation
to PFPC Trust for the termination of services before the
expiration of the then-current Initial or Renewal Term.
(4) If the Fund gives notice of Early Termination after expiration
of the specified notice period to terminate this Agreement in
the ordinary course at the end of the then-current Initial or
Renewal Term, the references above to "expiration of the
then-current Initial or Renewal Term" shall be deemed to mean
"expiration of the Renewal Term immediately following the
then-current Initial or Renewal Term."
(5) If any of the Fund's assets serviced by PFPC Trust under this
Agreement are removed from the coverage of this Agreement
("Removed Assets") and are subsequently serviced by another
service provider (including the Fund or an affiliate of the
Fund): (i) the Fund will be deemed to have caused an Early
Termination with respect to such Removed Assets as of the day
immediately preceding the first such removal of assets; and,
(ii) at, PFPC Trust's option, either (a) the Fund will also be
deemed to have caused an Early Termination with respect to all
non-Removed Assets as of
27
a date selected by PFPC Trust, or (b) this Agreement will
remain in full force and effect with respect to all
non-Removed Assets.
16. Notices. Notices shall be addressed (a) if to PFPC Trust at 0000 Xxxxxxx
Xxxxxxxxx, 0xx Xxxxx, Xxxxx 000, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000,
Attention: Xxx Xxxxxxxx (or such other address as PFPC Trust may inform
the Fund in writing); (b) if to the Fund, at c/o Magnetar Financial LLC,
0000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxxx, XX 00000, Attention:
_____________ (or such other address as the Fund may inform PFPC Trust in
writing); or (c) if to neither of the foregoing, at such other address as
shall have been given by like notice to the sender of any such notice or
other communication by the other party. If notice is sent by confirming
electronic delivery, hand or facsimile sending device, it shall be deemed
to have been given immediately. If notice is sent by first-class mail, it
shall be deemed to have been given five days after it has been mailed. If
notice is sent by messenger, it shall be deemed to have been given on the
day it is delivered.
17. Amendments. This Agreement, or any term hereof, may be changed or waived
only by a written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
18. Delegation; Assignment. PFPC Trust may assign its rights and delegate its
duties hereunder to any affiliate of PFPC Trust or of The PNC Financial
Services Group, Inc., provided that PFPC Trust gives the Fund thirty (30)
days' prior written notice of such assignment or delegation.
19. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
28
20. Miscellaneous.
(a) Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior
agreements and understandings relating to the subject matter hereof,
provided that the parties may embody in one or more separate
documents their agreement, if any, with respect to delegated duties.
(b) Non-Solicitation. During the term of this Agreement and for one year
thereafter, the Fund shall not (with the exceptions noted in the
immediately succeeding sentence) knowingly solicit or recruit for
employment or hire any of PFPC Trust's employees, and the Fund shall
cause the Fund's sponsor and the Fund's affiliates to not (with the
exceptions noted in the immediately succeeding sentence) knowingly
solicit or recruit for employment or hire any of PFPC Trust's
employees. To "knowingly" solicit, recruit or hire within the
meaning of this provision does not include, and therefore does not
prohibit, solicitation, recruitment or hiring of a PFPC Trust
employee by the Fund, the Fund's sponsor or an affiliate of the Fund
if the PFPC Trust employee was identified by such entity solely as a
result of the PFPC Trust employee's response to a general
advertisement by such entity in a publication of trade or industry
interest or other similar general solicitation by such entity.
(c) No Representations or Warranties. Except as expressly provided in
this Agreement, PFPC Trust hereby disclaims all representations and
warranties, express or implied, made to the Fund or any other
person, including, without limitation, any warranties regarding
quality, suitability, merchantability, fitness
29
for a particular purpose or otherwise (irrespective of any course of
dealing, custom or usage of trade), of any services or any goods
provided incidental to services provided under this Agreement. PFPC
Trust disclaims any warranty of title or non-infringement except as
otherwise set forth in this Agreement.
(d) No Changes that Materially Affect Obligations. Notwithstanding
anything in this Agreement to the contrary, the Fund agrees not to
make any modifications to its registration statement or adopt any
policies which would affect materially the obligations or
responsibilities of PFPC Trust hereunder without the prior written
approval of PFPC Trust, which approval shall not be unreasonably
withheld or delayed. The scope of services to be provided by PFPC
Trust under this agreement shall not be increased as a result of new
or revised regulatory or other requirements that may become
applicable with respect to the Fund, unless the parties hereto
expressly agree in writing to any such increase.
(e) Captions. 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.
(f) Information. The Fund will provide such information and
documentation as PFPC Trust may reasonably request in connection
with services provided by PFPC Trust to the Fund.
(g) Governing Law. This Agreement shall be deemed to be a contract made
in Delaware and governed by Delaware law, without regard to
principles of conflicts of law.
(h) Partial Invalidity. If any provision of this Agreement shall be held
or made
30
invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
(i) Parties in Interest. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Except as may be explicitly stated
in this Agreement, (i) this Agreement is not for the benefit of any
other person or entity and (ii) there shall be no third party
beneficiaries hereof.
(j) Facsimile Signatures. The facsimile signature of any party to this
Agreement shall constitute the valid and binding execution hereof by
such party.
(k) Fund Disclaimer. It is expressly agreed that the obligations of the
Fund hereunder shall not be binding upon any of its Trustees,
shareholders, nominees, officers, agents or employees personally,
but shall bind only the property or assets of the Fund, as the case
may be.
(l) Customer Identification Program Notice. To help the U.S. government
fight the funding of terrorism and money laundering activities, U.S.
Federal law requires each financial institution to obtain, verify,
and record certain information that identifies each person who
initially opens an account with that financial institution on or
after October 1, 2003. Consistent with this requirement, PFPC Trust
may request (or may have already requested) the Fund's name, address
and taxpayer identification number or other government-issued
identification number, and, if such party is a natural person, that
party's date of birth. PFPC Trust may also ask (and may have already
asked) for additional identifying information, and PFPC Trust may
take steps (and may have already taken steps) to verify the
31
authenticity and accuracy of these data elements.
32
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC TRUST COMPANY
By:
-----------------------
Name:
-----------------------
Title:
-----------------------
MAGNETAR SPECTRUM FUND
By:
-----------------------
Name:
-----------------------
Title:
-----------------------
33
