Exhibit (j)(1)
CUSTODY AGREEMENT
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Agreement made as of this day of 9th day of February, 1990, between,
XXXXXXXX CONVERTIBLE FUND, INC., a Delaware corporation organized and existing
under the laws of the State of Delaware, having its principal office and place
of business at 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (hereinafter called the
"Fund"), and THE BANK OF NEW YORK, a New York corporation authorized to do a
banking business, having its principal office and place of business at 00 Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (hereinafter called the "Custodian") .
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set forth the
Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1. "Authorized Person" shall be deemed to include any person,
whether or not such person is an Officer or employee of the Fund, duly
authorized by the Board of Directors of the Fund to give Oral Instructions and
Written Instructions on behalf of the Fund and listed in the Certificate annexed
hereto as Appendix A or such other Certificate as may be received by the
Custodian from time to time.
2. "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities, its successor
or successors and its nominee or nominees.
3. "Call Option" shall mean an exchange traded option with
respect to Securities other than Stock Index Options, Futures Contracts, and
Futures Contract Options entitling the holder, upon timely exercise and payment
of the exercise price, as specified therein, to purchase from the writer thereof
the specified underlying Securities.
4. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be given to
the Custodian which is actually received by the Custodian and signed on behalf
of the Fund by any two Officers.
5. "Clearing Member" shall mean a registered broker-dealer which
is a clearing member under the rules of O.C.C. and a member of a national
securities exchange qualified to act as a custodian for an investment company,
or any broker-dealer reasonably believed by the Custodian to be such a clearing
member.
6. "Collateral Account" shall mean a segregated account so
denominated which is specifically allocated to a Series and pledged to the
Custodian as security for, and in consideration of, the Custodian's issuance of
(a) any Put Option guarantee letter or similar document described in paragraph 8
of Article V herein, or (b) any receipt described in Article V or VIII herein.
7. "Covered Call Option" shall mean an exchange trade option
entitling the holder, upon timely exercise and payment of the exercise price, as
specified therein, to purchase from the writer thereof the specified underlying
Securities (excluding Futures Contracts) which are owned by the writer thereof
and subject to appropriate restrictions.
8. "Depository" shall mean The Depository Trust Company ("DTC"),
a clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a resolution
of the Fund's Board of Directors specifically approving deposits therein by the
Custodian.
9. "Financial Futures Contract" shall mean the firm commitment to
buy or sell fixed income securities including, without limitation, U.S. Treasury
Bills, U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of
deposit, and Eurodollar certificates of deposit, during a specified month at an
agreed upon price.
10. "Futures Contract" shall mean a Financial Futures Contract
and/or Stock Index Futures Contracts.
11. "Futures Contract Option" shall mean an option with respect to
a Futures Contract.
12. "Margin Account" shall mean a segregated account in the name
of a broker, dealer, futures commission merchant, or a Clearing Member, or in
the name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement") , separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time determine. Securities held
in the Book-Entry System or the Depository shall be deemed to have been
deposited in, or withdrawn from, a Margin Account upon the Custodian's effecting
an appropriate entry in its books and records.
13. "Money Market Security" shall be deemed to include, without
limitation, certain Reverse Repurchase Agreements, debt obligations issued or
guaranteed as to interest and principal by the government of the United States
or agencies or instrumentalities thereof, any tax, bond or revenue anticipation
note issued by any state or municipal government or public authority, commercial
paper, certificates of deposit and bankers' acceptances, repurchase agreements
with respect to the same and bank time deposits, where the purchase and sale of
such securities normally requires settlement in federal funds on the same day as
such purchase or sale.
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14. "O.C.C." shall mean the Options Clearing Corporation, a
clearing agency registered under Section 17A of the Securities Exchange Act of
1934, its successor or successors, and its nominee or nominees.
15. "Officers" shall be deemed to include the President, any Vice
President, the Secretary, the Treasurer, the Controller, any Assistant
Secretary, any Assistant Treasurer, and any other person or persons, whether or
not any such other person is an officer of the Fund, duly authorized by the
Board of Directors of the Fund to execute any Certificate, instruction, notice
or other instrument on behalf of the Fund and listed in the Certificate annexed
hereto as Appendix B or such other Certificate as may be received by the
Custodian from time to time.
16. "Option" shall mean a Call Option, Covered Call Option, Stock
Index Option and/or a Put Option.
17. "Oral Instructions" shall mean verbal instructions actually
received by the Custodian from an Authorized Person or from a person reasonably
believed by the Custodian to be an Authorized Person.
18. "Put Option" shall mean an exchange traded option with respect
to Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and tender of the
specified underlying Securities, to sell such Securities to the writer thereof
for the exercise price.
19. "Reverse Repurchase Agreement" shall mean an agreement
pursuant to which the Fund sells Securities and agrees to repurchase such
Securities at a described or specified date and price.
20. "Security" shall be deemed to include, without limitation,
Money Market Securities, Call Options, Put Options, Stock Index Options, Stock
Index Futures Contracts, Stock Index Futures Contract Options, Financial Futures
Contracts, Financial Futures Contract Options, Reverse Repurchase Agreements,
common stocks and other securities having characteristics similar to common
stocks, preferred stocks, debt obligations issued by state or municipal
governments and by public authorities, (including, without limitation, general
obligation bonds, revenue bonds and industrial bonds and industrial development
bonds), bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase, sell or subscribe for the same, or evidencing or representing
any other rights or interest therein, or any property or assets.
21. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically al located
to such Series shall be deposited and withdrawn from time to time in accordance
with Certificates received by the Custodian in connection with such transactions
as the Fund may from time to time determine.
22. "Series" shall mean the various portfolios, if any, of the
Fund as described from time to time in the current and effective prospectus for
the Fund.
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23. "Shares" shall mean the shares of capital stock of the Fund,
each of which is in the case of a Fund having Series allocated to a particular
Series.
24. "Stock Index Futures Contract" shall mean a bilateral
agreement pursuant to which the parties agree to take or make delivery of an
amount of cash equal to a specified dollar amount times the difference between
the value of a particular stock index at the close of the last business day of
the contract and the price at which the futures contract is originally struck.
25. "Stock Index Option" shall mean an exchange traded option
entitling the holder, upon timely exercise, to receive an amount of cash
determined by reference to the difference between the exercise price and the
value of the index on the date of exercise.
26. "Written Instructions" shall mean written communications
actually received by the Custodian from an Authorized Person or from a person
reasonably believed by the Custodian to be an Authorized Person by telex or any
other such system whereby the receiver of such communications is able to verify
by codes or otherwise with a reasonable degree of certainty the identity of the
sender of such communication.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as
custodian of the Securities and moneys at any time owned by the Fund during the
period of this Agreement.
2. The Custodian hereby accepts appointment as such custodian and
agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article
and in Article VIII, the Fund will deliver or cause to be delivered to the
Custodian all Securities and all moneys owned by it, at any time during the
period of this Agreement, and shall specify with respect to such Securities and
money the Series to which the same are specifically allocated. The Custodian
shall segregate, keep and maintain the assets of the Series separate and apart.
The Custodian will not be responsible for any Securities and moneys not actually
received by it. The Custodian will be entitled to reverse any credits made on
the Fund's behalf where such credits have been previously made and moneys are
not finally collected. The Fund shall deliver to the Custodian a certified
resolution of the Board of Directors of the Fund, substantially in the form of
Exhibit A hereto, approving, authorizing and instructing the Custodian on a
continuous and on-going basis to deposit in the Book-Entry System all Securities
eligible for deposit therein, regardless of the Series to which the same are
specifically allocated and to utilize the Book-Entry System to the extent
possible in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of Securities,
loans of Securities, and deliveries and returns of Securities collateral. Prior
to a deposit of Securities specifically allocated to a Series in the Depository,
the Fund shall deliver to the Custodian a certified resolution of the Board of
Directors of the Fund, substantially in the form
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of Exhibit B hereto, approving, authorizing and instructing the Custodian on a
continuous and ongoing basis until instructed to the contrary by a Certificate
actually received by the Custodian to deposit in the Depository all Securities
specifically allocated to such Series eligible for deposit therein, and to
utilize the Depository to the extent possible with respect to such Securities in
connection with its performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of Securities, loans of
Securities, and deliveries and returns of Securities collateral. Securities and
moneys deposited in either the Book-Entry System or the Depository will be
represented in accounts which include only assets held by the Custodian for
customers, including, but not limited to, accounts in which the Custodian acts
in a fiduciary or representative capacity. Prior to the Custodian's accepting,
utilizing and acting with respect to Clearing Member confirmations for Options
and transactions in Options for a Series as provided in this Agreement, the
Custodian shall have received a certified resolution of the Fund's Board of
Directors, substantially in the form of Exhibit C hereto, approving, authorizing
and instructing the Custodian on a continuous and on-going basis, until
instructed to the contrary by a Certificate actually received by the Custodian,
to accept, utilize and act in accordance with such confirmations as provided in
this Agreement with respect to such Series.
2. The Custodian shall establish and maintain separate accounts,
in the name of each Series, and shall credit to the separate account for each
Series all moneys received by it for the account of the Fund with respect to
such Series. Money credited to a separate account for a Series shall be
disbursed by the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Certificates setting forth the name and
address of the person to whom the payment is to be made, the Series account from
which payment is to be made, and the purpose for which payment is to be made; or
(c) In payment of the fees and in reimbursement of the
expenses and liabilities of the Custodian attributable to such Series.
3. Promptly after the close of business on each day the Custodian
shall furnish the Fund with confirmations and a summary, on a per Series basis,
of all transfers to or from the account of the Fund for a Series, either
hereunder or with any co-custodian or sub-custodian appointed in accordance with
this Agreement during said day. Where Securities are transferred to the account
of the Fund for a Series, the Custodian shall also by book-entry or otherwise
identify as belonging to such Series a quantity of Securities in a fungible bulk
of Securities registered in the name of the Custodian (or its nominee) or shown
on the Custodian's account on the books of the Book-Entry System or the
Depository. At least monthly and from time to time, the Custodian shall furnish
the Fund with a detailed statement, on a per Series basis, of the Securities and
moneys held by the Custodian for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article
and in Article VIII, all Securities held by the Custodian hereunder, which are
issued or issuable only in bearer form, except such Securities as are held in
the Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the name
of any duly appointed registered nominee of the Custodian as the Custodian may
from time to time determine, or
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in the name of the Book-Entry System or the Depository or their successor or
successors, or their nominee or nominees. The Fund agrees to furnish to the
Custodian appropriate instruments to enable the Custodian to hold or deliver in
proper form for transfer, or to register in the name of its registered nominee
or in the name of the Book-Entry System or the Depository any Securities which
it may hold hereunder and which may from time to time be registered in the name
of the Fund. The Custodian shall hold all such Securities specifically allocated
to a Series which are not held in the Book-Entry System or in the Depository in
a separate account in the name of such Series physically segregated at all times
from those of any other person or persons.
5. Except as otherwise provided in this Agreement and unless
otherwise instructed to the contrary by a Certificate, the Custodian by itself,
or through the use of the Book-Entry System or the Depository with respect to
Securities held hereunder and therein deposited, shall with respect to all
Securities held for the Fund hereunder in accordance with preceding paragraph 4:
(a) Collect all income due or payable;
(b) Present for payment and collect the amount pay able
upon such Securities which are called, but only if either (i) the Custodian
receives a written notice of such call, or (ii) notice of such call appears in
one or more of the publications listed in Appendix C annexed hereto, which may
be amended at any time by the Custodian without the prior notification or
consent of the Fund;
(c) Present for payment and collect the amount pay able
upon all Securities which mature;
(d) Surrender Securities in temporary form for definitive
Securities;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the Federal Income Tax Laws or the laws or
regulations of any other taxing authority now or hereafter in effect; and
(f) Hold directly, or through the Book-Entry System or
the Depository with respect to Securities therein deposited, for the account of
a Series, all rights and similar securities issued with respect to any
Securities held by the Custodian for such Series hereunder.
6. Upon receipt of a Certificate and not otherwise, the
Custodian, directly or through the use of the Book-Entry System or the
Depository, shall:
(a) Execute and deliver to such persons as may be
designated in such Certificate proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as owner of any Securities held by
the Custodian hereunder for the Series specified in such Certificate may be
exercised;
(b) Deliver any Securities held by the Custodian
hereunder for the Series specified in such Certificate in exchange for 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 and receive and hold
hereunder specifically allocated to such Series any cash or other Securities
received in exchange;
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(c) Deliver any Securities held by the Custodian
hereunder for the Series specified in such Certificate 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 hereunder specifically al
located to such Series such certificates of 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 the
Series specified in such Certificate, and take such other steps as shall be
stated in such Certificate to be for the purpose of effectuating any duly
authorized plan of liquidation, reorganization, merger, consolidation or
recapitalization of the Fund; and
(e) Present for payment and collect the amount pay able
upon Securities not described in preceding paragraph 5(b) of this Article which
may be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the
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 a
Certificate from the Fund stating, that any such instruments or certificates are
available. The Fund shall deliver to the Custodian such a Certificate no later
than the business day preceding the availability of any such instrument or
certificate. Prior to such availability, the Custodian shall comply with Section
17(f) of the Investment Company Act of 1940, as amended, 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 Certificates received by the 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 the 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 such
Security is held by such broker, dealer or futures commission merchant, in
book-entry form or otherwise, in the name of the Custodian (or any nominee of
the Custodian) as custodian for the Fund, provided, however, that
notwithstanding the foregoing, payments to or deliveries from the Margin
Account, and payments with respect to Securities to which a Margin Account
relates, shall be made in accordance with the terms and conditions of the Margin
Account Agreement. Whenever any such instruments or certificates are available,
the 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 only
against the delivery to the Custodian of such instrument or such certificate,
and deliver any Future Contract, Option or Futures Contract Option for which
such instruments or such certificates are available only against receipt by the
Custodian of payment therefor. Any such instrument or certificate delivered to
the Custodian shall be held by the Custodian hereunder in accordance with, and
subject to, the provisions of this Agreement.
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ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND OTHER THAN OPTIONS,
FUTURES CONTRACTS AND FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund, other
than a purchase of an Option, a Futures Contract, or a Futures Contract Option,
the Fund shall deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a Certificate, and (ii) with
respect to each purchase of Money Market Securities, a Certificate, Oral
Instructions or Written Instructions, specifying with respect to each such
purchase: (a) the Series to which such Securities are to be specifically
allocated; (b) the name of the issuer and the title of the Securities; (c) the
number of shares or the principal amount purchased and accrued interest, if any;
(d) the date of purchase and settlement; (e) the purchase price per unit; (f)
the total amount payable upon such purchase; (g) the name of the person from
whom or the broker through whom the purchase was made, and the name of the
clearing broker, if any; and (h) the name of the broker to whom payment is to be
made. The Custodian shall, upon receipt of Securities purchased by or for the
Fund, pay to the broker specified in the Certificate out of the moneys held for
the account of such Series the total amount payable upon such purchase, provided
that the same conforms to the total amount payable as set forth in such
Certificate, Oral Instructions or Written Instructions.
2. Promptly after each sale of Securities by the Fund, other than
a sale of any Option, Futures Contract, Futures Contract Option, or any Reverse
Repurchase Agreement, the Fund shall deliver to the Custodian (i) with respect
to each sale of Securities which are not Money Market Securities, a Certificate,
and (ii) with respect to each sale of Money Market Securities, a Certificate,
Oral Instructions or Written Instructions, specifying with respect to each such
sale: (a) the Series to which such Securities were specifically allocated; (b)
the name of the issuer and the title of the Security; (c) the number of shares
or principal amount sold, and accrued interest, if any; (d) the date of sale;
(e) the sale price per unit; (f) the total amount payable to the Fund upon such
sale; (g) the name of the broker through whom or the person to whom the sale was
made, and the name of the clearing broker, if any; and (h) the name of the
broker to whom the Securities are to be delivered. The Custodian shall deliver
the Securities specifically allocated to such Series to the broker specified in
the Certificate upon the total amount payable to the Fund upon such sale,
provided that the same conforms to the total amount payable as set forth in such
Certificate, Oral Instructions or Written Instructions.
ARTICLE V
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the
Fund shall deliver to the Custodian a Certificate specifying with respect to
each Option purchased: (a) the Series to which such Option is specifically
allocated; (b) the type of Option (put or call); (c) the name of the issuer and
the title and number of shares subject to such Option or, in the case of a Stock
Index Option, the stock index to which such Option relates and the number of
Stock Index Options purchased; (d) the expiration date; (e) the exercise price;
(f) the dates of purchase and settlement; (g) the total amount payable by the
Fund in connection with such purchase; (h) the name of the Clearing Member
through whom such Option was purchased; and (i) the name of the broker to whom
payment is to be
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made. The Custodian shall pay, upon receipt of a Clearing Member's statement
confirming the purchase of such Option held by such Clearing Member for the
account of the Custodian (or any duly appointed and registered nominee of the
Custodian) as custodian for the Fund, out of moneys held for the account of the
Series to which such Option is to be specifically allocated, the total amount
payable upon such purchase to the Clearing Member through whom the purchase was
made, provided that the same conforms to the total amount pay able as set forth
in such Certificate.
2. Promptly after the sale of any Option purchased by the Fund
pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian a
Certificate specifying with respect to each such sale: (a) the Series to which
such Option was specifically allocated; (b) the type of Option (put or call);
(c) the name of the issuer and the title and number of shares subject to such
Option or, in the case of a Stock Index Option, the stock index to which such
Option relates and the number of Stock Index Options sold; (d) the date of sale;
(e) the sale price; (f) the date of settlement; (g) the total amount payable to
the Fund upon such sale; and (h) the name of the Clearing Member through whom
the sale was made. The Custodian shall consent to the delivery of the Option
sold by the Clearing Member which previously supplied the confirmation described
in preceding paragraph 1 of this Article with respect to such Option against
payment to the Custodian of the total amount payable to the Fund, provided that
the same conforms to the total amount payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to such Call Option: (a) the
Series to which such Call Option was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Call Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid by the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Call Option was exercised.
The Custodian shall, upon receipt of the Securities underlying the Call Option
which was exercised, pay out of the moneys held for the account of the Series to
which such Call Option was specifically allocated the total amount payable to
the Clearing Member through whom the Call Option was exercised, provided that
the same conforms to the total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to such Put Option: (a) the
Series to which such Put Option was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Put Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid to the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Put Option was exercised.
The Custodian shall, upon receipt of the amount payable upon the exercise of the
Put Option, deliver or direct the Depository to deliver the Securities
specifically allocated to such Series, provided the same conforms to the amount
payable to the Fund as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock Index
Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver to the Custodian a Certificate specifying with respect to such Stock
Index Option: (a) the Series to which such Stock Index Option was specifically
al located; (b) the type of Stock Index Option (put or call); (c) the number of
Options
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being exercised; (d) the stock index to which such Option relates; (e) the
expiration date; (f) the exercise price; (g) the total amount to be received by
the Fund in connection with such exercise; and (h) the Clearing Member from whom
such payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Covered Call Option: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares for which
the Covered Call Option was written and which underlie the same; (c) the
expiration date; (d) the exercise price; (e) the premium to be received by the
Fund; (f) the date such Covered Call Option was written; and (g) the name of the
Clearing Member through whom the premium is to be received. The Custodian shall
deliver or cause to be delivered, in exchange for receipt of the premium
specified in the Certificate with respect to such Covered Call Option, such
receipts as are required in accordance with the customs prevailing among
Clearing Members dealing in Covered Call Options and shall impose, or direct the
Depository to impose, upon the underlying Securities specified in the
Certificate specifically allocated to such Series such restrictions as may be
required by such receipts. Notwithstanding the foregoing, the Custodian has the
right, upon prior written notification to the Fund, at any time to refuse to
issue any receipts for Securities in the possession of the Custodian and not
deposited with the Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and
described in the preceding paragraph of this Article is exercised, the Fund
shall promptly deliver to the Custodian a Certificate instructing the Custodian
to deliver, or to direct the Depository to deliver, the Securities subject to
such Covered Call Option and specifying: (a) the Series for which such Covered
Call Option was written; (b) the name of the issuer and the title and number of
shares subject to the Covered Call Option; (c) the Clearing Member to whom the
underlying Securities are to be delivered; and (d) the total amount pay able to
the Fund upon such delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver,
or direct the Depository to deliver, the underlying Securities as specified in
the Certificate against payment of the amount to be received as set forth in
such Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Put
Option: (a) the Series for which such Put Option was written; (b) the name of
the issuer and the title and number of shares for which the Put Option is
written and which underlie the same; (c) the expiration date; (d) the exercise
price; (e) the premium to be received by the Fund; (f) the date such Put Option
is written; (g) the name of the Clearing Member through whom the premium is to
be received and to whom a Put Option guarantee letter is to be delivered; (h)
the amount of cash, and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the Senior Security
Account for such Series; and (i) the amount of cash and/or the amount and kind
of Securities specifically allocated to such Series to be deposited into the
Collateral Account for such Series. The Custodian shall, after making the
deposits into the Collateral Account specified in the Certificate, issue a Put
Option guarantee letter substantially in the form utilized by the Custodian on
the date hereof, and deliver the same to the Clearing Member specified in the
Certificate against receipt of the premium specified in said Certificate.
Notwithstanding the foregoing, the Custodian shall be under no obligation to
issue any Put Option guarantee letter or similar document if it is unable to
make any of the representations contained therein.
10
9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Put Option was
written; (b) the name of the issuer and title and number of shares subject to
the Put Option; (c) the Clearing Member from whom the underlying Securities are
to be received; (d) the total amount payable by the Fund upon such delivery; (e)
the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be withdrawn from the Collateral Account for such
Series and (f) the amount of cash and/or the amount and kind of Securities,
specifically allocated to such Series, if any, to be withdrawn from the Senior
Security Account. Upon the return and/or cancellation of any Put Option
guarantee letter or similar document issued by the Custodian in connection with
such Put Option, the Custodian shall pay out of the moneys held for the account
of the Series to which such Put Option was specifically allocated the total
amount payable to the Clearing Member specified in the Certificate as set forth
in such Certificate against delivery of such Securities, and shall make the
withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Stock Index Option: (a) the Series for which such Stock Index Option was
written; (b) whether such Stock Index Option is a put or a call; (c) the number
of options written; (d) the stock index to which such Option relates; (e) the
expiration date; (f) the exercise price; (g) the Clearing Member through whom
such Option was written; (h) the premium to be received by the Fund; (i) the
amount of cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in the Senior Security Account for such
Series; (j) the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the Collateral Account
for such Series; and (k) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be deposited in a
Margin Account, and the name in which such account is to be or has been
established. The Custodian shall, upon receipt of the premium specified in the
Certificate, make the deposits, if any, into the Senior Security Account
specified in the Certificate, and either (1) deliver such receipts, if any,
which the Custodian has specifically agreed to issue, which are in accordance
with the customs prevailing among Clearing Members in Stock Index Options and
make the deposits into the Collateral Account specified in the Certificate, or
(2) make the deposits into the Margin Account specified in the Certificate.
11. Whenever a Stock Index Option written by the Fund and
described in the preceding paragraph of this Article is exercised, the Fund
shall promptly deliver to the Custodian a Certificate specifying with respect to
such Stock Index Option: (a) the Series for which such Stock Index Option was
written; (b) such information as may be necessary to identify the Stock Index
Option being exercised; (c) the Clearing Member through whom such Stock Index
Option is being exercised; (d) the total amount payable upon such exercise, and
whether such amount is to be paid by or to the Fund; (e) the amount of cash
and/or amount and kind of Securities, if any, to be withdrawn from the Margin
Account; and (f) the amount of cash and/or amount and kind of Securities, if
any, to be withdrawn from the Senior Security Account for such Series; and the
amount of cash and/or the amount and kind of Securities, if any, to be withdrawn
from the Collateral Account for such Series. Upon the return and/or cancellation
of the receipt, if any, delivered pursuant to the preceding paragraph of this
Article, the Custodian shall pay out of the moneys held for the account of the
Series to which such Stock Index Option was specifically allocated to the
Clearing Member specified in the Certificate the total amount payable, if any,
as specified therein.
11
12. Whenever the Fund purchases any Option identical to a
previously written Option described in paragraphs, 6, 8 or 10 of this Article in
a transaction expressly designated as a "Closing Purchase Transaction" in order
to liquidate its position as a writer of an Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to the Option
being purchased: (a) that the transaction is a Closing Purchase Transaction; (b)
the Series for which the Option was written; (c) the name of the issuer and the
title and number of shares subject to the Option, or, in the case of a Stock
Index Option, the stock index to which such Option relates and the number of
Options held; (d) the exercise price; (e) the premium to be paid by the Fund;
(f) the expiration date; (g) the type of Option (put or call); (h) the date of
such purchase; (i) the name of the Clearing Member to whom the premium is to be
paid; and (j) the amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Collateral Account, a specified Margin Account, or
the Senior Security Account for such Series. Upon the Custodian's payment of the
premium and the return and/or cancellation of any receipt issued pursuant to
paragraphs 6, 8 or 10 of this Article with respect to the Option being
liquidated through the Closing Purchase Transaction, the Custodian shall remove,
or direct the Depository to remove, the previously imposed restrictions on the
Securities underlying the Call Option.
13. Upon the expiration, exercise, or consummation of a Closing
Transaction with respect to, any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 Article III herein, and
upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the
Fund shall deliver to the Custodian a Certificate specifying with respect to
such Futures Contract, (or with respect to any number of identical Futures
Contract(s)): (a) the Series for which the Futures Contract is being entered;
(b) the category of Futures Contract (the name of the underlying stock index or
financial instrument); (c) the number of identical Futures Contracts entered
into; (d) the delivery or settlement date of the Futures Contract(s); (e) the
date the Futures Contract(s) was (were) entered into and the maturity date; (f)
whether the Fund is buying (going long) or selling (going short) on such Futures
Contract(s); (g) the amount of cash and/or the amount and kind of Securities, if
any, to be deposited in the Senior Security Account for such Series; (h) the
name of the broker, dealer, or futures commission merchant through whom the
Futures Contract was entered into; and (i) the amount of fee or com mission, if
any, to be paid and the name of the broker, dealer, or futures commission
merchant to whom such amount is to be paid. The Custodian shall make the
deposits, if any, to the Margin Account in accordance with the terms and
conditions of the Margin Account Agreement. The Custodian shall make payment out
of the moneys specifically allocated to such Series of the fee or commission, if
any, specified in the Certificate and deposit in the Senior Security Account for
such Series the amount of cash and/or the amount and kind of Securities
specified in said Certificate.
12
2. (a) Any variation margin payment or similar payment
required to be made by the Fund to a broker, dealer, or futures commission
merchant with respect to an outstanding Futures Contract, shall be made by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
(b) Any variation margin payment or similar payment from
a broker, dealer, or futures commission merchant to the Fund with respect to an
outstanding Futures Contract, shall be received and dealt with by the Custodian
in accordance with the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is
retained by the Fund until delivery or settlement is made on such Futures
Contract, the Fund shall deliver to the Custodian a Certificate specifying: (a)
the Futures Contract and the Series to which the same relates; (b) with respect
to a Stock Index Futures Contract, the total cash settlement amount to be paid
or received, and with respect to a Financial Futures Contract, the Securities
and/or amount of cash to be delivered or received; (c) the broker, dealer, or
futures commission merchant to or from whom payment or delivery is to be made or
received; and (d) the amount of cash and/or Securities to be withdrawn from the
Senior Security Account for such Series. The Custodian shall make the payment or
delivery specified in the Certificate, and delete such Futures Contract from the
statements delivered to the Fund pursuant to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to
offset a Futures Contract held by the Custodian hereunder, the Fund shall
deliver to the Custodian a Certificate specifying: (a) the items of information
required in a Certificate described in paragraph 1 of this Article, and (b) the
Futures Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in such Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option by
the Fund, the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a) the Series to which
such Option is specifically allocated; (b) the type of Futures Contract Option
(put or call); (c) the type of Futures Contract and such other information as
may be necessary to identify the Futures Contract underlying the Futures
Contract Option purchased; (d) the expiration date; (e) the exercise price; (f)
the dates of purchase and settlement; (g) the amount of premium to be paid by
the Fund upon such purchase; (h) the name of the broker or futures commission
merchant through whom such option was purchased; and (i) the name of the broker,
or futures commission merchant, to whom payment is to be made. The Custodian
shall pay out of the moneys specifically al located to such Series, the total
amount to be paid upon such purchase to the broker or futures
13
commissions merchant through whom the purchase was made, provided that the same
conforms to the amount set forth in such Certificate.
2. Promptly after the sale of any Futures Contract Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to each such
sale: (a) Series to which such Futures Contract Option was specifically
allocated; (b) the type of Future Contract Option (put or call); (c) the type of
Futures Contract and such other information as may be necessary to identify the
Futures Contract underlying the Futures Contract Option; (d) the date of sale;
(e) the sale price; (f) the date of settlement; (g) the total amount payable to
the Fund upon such sale; and (h) the name of the broker of futures commission
merchant through whom the sale was made. The Custodian shall consent to the
cancellation of the Futures Contract Option being closed against payment to the
Custodian of the total amount payable to the Fund, provided the same conforms to
the total amount payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund
pursuant to paragraph 1 is exercised by the Fund, the Fund shall promptly
deliver to the Custodian a Certificate specifying: (a) the Series to which such
Futures Contract Option was specifically allocated; (b) the particular Futures
Contract Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e) the name
of the broker or futures commission merchant through whom the Futures Contract
Option is exercised; (f) the net total amount, if any, payable by the Fund; (g)
the amount, if any, to be received by the Fund; and (h) the amount of cash
and/or the amount and kind of Securities to be deposited in the Senior Security
Account for such Series. The Custodian shall make, out of the moneys and
Securities specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with respect to
such Futures Contract Option: (a) the Series for which such Futures Contract
Option was written; (b) the type of Futures Contract Option (put or call); (c)
the type of Futures Contract and such other information as may be necessary to
identify the Futures Contract underlying the Futures Contract Option; (d) the
expiration date; (e) the exercise price; (f) the premium to be received by the
Fund; (g) the name of the broker or futures commission merchant through whom the
premium is to be received; and (h) the amount of cash and/or the amount and kind
of Securities, if any, to be deposited in the Senior Security Account for such
Series. The Custodian shall, upon receipt of the premium specified in the
Certificate, make out of the moneys and Securities specifically allocated to
such Series the deposits into the Senior Security Account, if any, as specified
in the Certificate. The deposits, if any, to be made to the Margin Account shall
be made by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which
is a call is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom such Futures
Contract Option was
14
exercised; (e) the net total amount, if any, payable to the Fund upon such
exercise; (f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount of cash and/or the amount and kind of Securities to
be deposited in the Senior Security Account for such Series. The Custodian
shall, upon its receipt of the net total amount payable to the Fund, if any,
specified in such Certificate make the payments, if any, and the deposits, if
any, into the Senior Security Account as specified in the Certificate. The
deposits, if any, to be made to the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
6. Whenever a Futures Contract Option which is written by the
Fund and which is a put is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Option was
specifically al located; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying such Futures Contract Option; (d)
the name of the broker or futures commission merchant through whom such Futures
Contract Option is exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exercise; and (g) the amount and kind of Securities and/or cash to be
withdrawn from or deposited in, the Senior Security Account for such Series, if
any. The Custodian shall, upon its receipt of the net total amount payable to
the Fund, if any, specified in the Certificate, make out of the moneys and
Securities specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits to and/or withdrawals from the Margin Account, if any,
shall be made by the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
7. Whenever the Fund purchases any Futures Contract Option
identical to a previously written Futures Contract Option described in this
Article in order to liquidate its position as a writer of such Futures Contract
Option, the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to the Futures Contract Option being purchased: (a) the
Series to which such Option is specifically allocated; (b) that the transaction
is a closing transaction; (c) the type of Future Contract and such other
information as may be necessary to identify the Futures Contract underlying the
Futures Option Contract; (d) the exercise price; (e) the premium to be paid by
the Fund; (f) the expiration date; (g) the name of the broker or futures
commission merchant to whom the premium is to be paid; and (h) the amount of
cash and/or the amount and kind of Securities, if any, to be withdrawn from the
Senior Security Account for such Series. The Custodian shall effect the
withdrawals from the Senior Security Account specified in the Certificate. The
withdrawals, if any, to be made from the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or purchased by
the Fund and described in this Article, the Custodian shall (a) delete such
Futures Contract Option from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein and, (b) make such withdrawals from and/or in
the case of an exercise such deposits into the Senior Security Account as may be
specified in a Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of
a Futures Contract Option described in this Article shall be subject to Article
VI hereof.
15
ARTICLE VIII
SHORT SALES
1. Promptly after any short sales by any Series of the Fund, the
Fund shall promptly deliver to the Custodian a Certificate specifying: (a) the
Series for which such short sale was made; (b) the name of the issuer and the
title of the Security; (c) the number of shares or principal amount sold, and
accrued interest or dividends, if any; (d) the dates of the sale and settlement;
(e) the sale price per unit; (f) the total amount credited to the Fund upon such
sale, if any, (g) the amount of cash and/or the amount and kind of Securities,
if any, which are to be deposited in a Margin Account and the name in which such
Margin Account has been or is to be established; (h) the amount of cash and/or
the amount and kind of Securities, if any, to be deposited in a Senior Security
Account, and (i) the name of the broker through whom such short sale was made.
The Custodian shall upon its receipt of a statement from such broker confirming
such sale and that the total amount credited to the Fund upon such sale, if any,
as specified in the Certificate is held by such broker for the account of the
Custodian (or any nominee of the Custodian) as custodian of the Fund, issue a
receipt or make the deposits into the Margin Account and the Senior Security
Account specified in the Certificate.
2. In connection with the closing-out of any short sale, the Fund
shall promptly deliver to the Custodian a Certificate specifying with respect to
each such closing out: (a) the Series for which such transaction is being made;
(b) the name of the issuer and the title of the Security; (c) the number of
shares or the principal amount, and accrued interest or dividends, if any,
required to effect such closing-out to be delivered to the broker; (d) the dates
of closing-out and settlement; (e) the purchase price per unit; (f) the net
total amount payable to the Fund upon such closing-out; (g) the net total amount
payable to the broker upon such closing-out; (h) the amount of cash and the
amount and kind of Securities to be withdrawn, if any, from the Margin Account;
(i) the amount of cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Senior Security Account; and (j) the name of the broker
through whom the Fund is effecting such closing-out. The Custodian shall, upon
receipt of the net total amount payable to the Fund upon such closing-out, and
the return and/ or cancellation of the receipts, if any, issued by the Custodian
with respect to the short sale being closed-out, pay out of the moneys held for
the account of the Fund to the broker the net total amount payable to the
broker, and make the withdrawals from the Margin Account and the Senior Security
Account, as the same are specified in the Certificate.
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase Agreement
with respect to Securities and money held by the Custodian hereunder, the Fund
shall deliver to the Custodian a Certificate or in the event such Reverse
Repurchase Agreement is a Money Market Security, a Certificate, Oral
Instructions, or Written Instructions specifying: (a) the Series for which the
Reverse Repurchase Agreement is entered; (b) the total amount payable to the
Fund in connection with such Reverse Repurchase Agreement and specifically
allocated to such Series; (c) the broker or dealer through or with whom the
Reverse Repurchase Agreement is entered; (d) the amount and kind of Securities
to be delivered by the Fund to such broker or dealer; (e) the date of such
Reverse Repurchase Agreement; and (f) the amount of cash and/or the amount and
kind of Securities, if any,
16
specifically allocated to such Series to be deposited in a Senior Security
Account for such Series in connection with such Reverse Repurchase Agreement.
The Custodian shall, upon receipt of the total amount payable to the Fund
specified in the Certificate, Oral Instructions, or Written Instructions make
the delivery to the broker or dealer, and the deposits, if any, to the Senior
Security Account, specified in such Certificate, Oral Instructions, or Written
Instructions.
2. Upon the termination of a Reverse Repurchase Agreement
described in preceding paragraph 1 of this Article, the Fund shall promptly
deliver a Certificate or, in the event such Reverse Repurchase Agreement is a
Money Market Security, a Certificate, Oral Instructions, or Written Instructions
to the Custodian specifying: (a) the Reverse Repurchase Agreement being
terminated and the Series for which same was entered; (b) the total amount
payable by the Fund in connection with such termination; (c) the amount and kind
of Securities to be received by the Fund and specifically allocated to such
Series in connection with such termination; (d) the date of termination; (e) the
name of the broker or dealer with or through whom the Reverse Repurchase
Agreement is to be terminated; and (f) the amount of cash and/or the amount and
kind of Securities to be withdrawn from the Senior Securities Account for such
Series. The Custodian shall, upon receipt of the amount and kind of Securities
to be received by the Fund specified in the Certificate, Oral Instructions, or
Written Instructions, make the payment to the broker or dealer, and the
withdrawals, if any, from the Senior Security Account, specified in such
Certificate, Oral Instructions, or Written Instructions.
ARTICLE X
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Custodian hereunder, the Fund shall deliver or
cause to be delivered to the Custodian a Certificate specifying with respect to
each such loan: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities, (c) the
number of shares or the principal amount loaned, (d) the date of loan and
delivery, (e) the total amount to be delivered to the Custodian against the loan
of the Securities, including the amount of cash collateral and the premium, if
any, separately identified, and (f) the name of the broker, dealer, or financial
institution to which the loan was made. The Custodian shall deliver the
Securities thus designated to the broker, dealer or financial institution to
which the loan was made upon receipt of the total amount designated as to be
delivered against the loan of Securities. The Custodian may accept payment in
connection with a delivery otherwise than through the Book-Entry System or
Depository only in the form of a certified or bank cashier's check payable to
the order of the Fund or the Custodian drawn on New York Clearing House funds
and may deliver Securities in accordance with the customs prevailing among
dealers in securities.
2. Promptly after each termination of the loan of Securities by
the Fund, the Fund shall deliver or cause to be delivered to the Custodian a
Certificate specifying with respect to each such loan termination and return of
Securities: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities to be
returned, (c) the number of shares or the principal amount to be returned, (d)
the date of termination, (e) the total amount to be delivered by the Custodian
(including the cash collateral for such Securities minus any offsetting credits
as described in said Certificate), and (f) the name of the broker, dealer, or
financial
17
institution from which the Securities will be returned. The Custodian shall
receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the moneys held for the account of the Fund, the total amount
payable upon such return of Securities as set forth in the Certificate.
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY ACCOUNTS, AND
COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits to,
or withdrawals from, a Senior Security Account as specified in a Certificate
received by the Custodian. Such Certificate shall specify the Series for which
such deposit or withdrawal is to be made, and the amount of cash and/or the
amount and kind of Securities specifically allocated to such Series to be
deposited in, or withdrawn from, such Senior Security Account for such Series.
In the event that the Fund fails to specify in a Certificate the Series, the
name of the issuer, the title and the number of shares or the principal amount
of any particular Securities to be deposited by the Custodian into, or withdrawn
from, a Senior Securities Ac count, the Custodian shall be under no obligation
to make any such deposit or withdrawal and shall so notify the Fund.
2. The Custodian shall make deliveries or payments from a Margin
Account to the broker, dealer, futures commission merchant or Clearing Member in
whose name, or for whose benefit, the account was established as specified in
the Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions
with respect to Securities deposited in any Margin Account shall be dealt with
in accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security
interest in and to any property at any time held by the Custodian in any
Collateral Account described herein. In accordance with applicable law the
Custodian may enforce its lien and realize on any such property whenever the
Custodian has made payment or delivery pursuant to any Put Option guarantee
letter or similar document or any receipt issued hereunder by the Custodian. In
the event the Custodian should realize on any such property net proceeds which
are less than the Custodian's obligations under any Put Option guarantee letter
or similar document or any receipt, such deficiency shall be a debt owed the
Custodian by the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with
a statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custodian shall make
available upon request to any broker, dealer, or futures commission merchant
specified in the name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.
6. Promptly after the close of business on each business day in
which cash and/or Securities are maintained in a Collateral Account for any
Series, the Custodian shall furnish the Fund
18
with a statement with respect to such Collateral Ac count specifying the amount
of cash and/or the amount and kind of Securities held therein. No later than the
close of business next succeeding the delivery to the Fund of such statement,
the Fund shall furnish to the Custodian a Certificate or Written Instructions
specifying the then market value of the Securities described in such statement.
In the event such then market value is indicated to be less than the Custodian's
obligation with respect to any outstanding Put Option guarantee letter or
similar document, the Fund shall promptly specify in a Certificate the
additional cash and/or Securities to be deposited in such Collateral Account to
eliminate such deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the
resolution of the Board of Directors of the Fund, certified by the Secretary or
any Assistant Secretary, either (i) setting forth with respect to the Series
specified therein the date of the declaration of a dividend or distribution, the
date of payment thereof, the record date as of which shareholders entitled to
payment shall be determined, the amount payable per Share of such Series to the
shareholders of record as of that date and the total amount payable to the
Dividend Agent and any sub-dividend agent or co-dividend agent of the Fund on
the payment date, or (ii) authorizing with respect to the Series specified
therein the declaration of dividends and distributions on a daily basis and
authorizing the Custodian to rely on Oral Instructions, Written Instructions or
a Certificate setting forth the date of the declaration of such dividend or
distribution, the date of payment thereof, the record date as of which
shareholders entitled to payment shall be determined, the amount payable per
Share of such Series to the shareholders of record as of that date and the total
amount payable to the Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution, Oral
Instructions, Written Instructions or Certificate, as the case may be, the
Custodian shall pay out of the moneys held for the account of each Series the
total amount payable to the Dividend Agent, and any sub-dividend agent or
co-dividend agent of the Fund with respect to such Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver to
the Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade date,
and price; and
(b) The amount of money to be received by the Custodian
for the sale of such Shares and specifically al located to the separate account
in the name of such Series.
2. Upon receipt of such money from the Transfer Agent, the
Custodian shall credit such money to the separate account in the name of the
Series for which such money was received.
19
3. Upon issuance of any Shares of any Series described in the
foregoing provisions of this Article, the Custodian shall pay, out of the money
held for the account of such Series, all original issue or other taxes required
to be paid by the Fund in connection with such issuance upon the receipt of a
Certificate specifying the amount to be paid.
4. Whenever the Fund desires the Custodian to make payment out of
the money held by the Custodian hereunder in connection with a redemption of any
Shares, it shall furnish to the Custodian:
(a) A resolution by the Board of Directors of the Fund
directing the Transfer Agent to redeem the Shares; and
(b) A Certificate specifying the number and Series of
Shares redeemed; and
(c) The amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting
forth the Series and number of Shares received by the Transfer Agent for
redemption and that such Shares are in good form for redemption, the Custodian
shall make payment to the Transfer Agent out of the moneys held in the separate
account in the name of the Series the total amount specified in the Certificate
issued pursuant to the foregoing paragraph 4 of this Article.
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion advance funds
on behalf of any Series which results in an overdraft because the moneys held by
the Custodian in the separate account for such Series shall be insufficient to
pay the total amount payable upon a purchase of Securities specifically
allocated to such Series, as set forth in a Certificate, Oral Instructions, or
Written Instructions or which results in an overdraft in the separate account of
such Series for some other reason, or if the Fund is for any other reason
indebted to the Custodian with respect to a Series (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 2 of
this Article), such overdraft or indebtedness shall be deemed to be a loan made
by the Custodian to the Fund for such Series 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 1/2% over Custodian's prime
commercial lending rate in effect from time to time, such rate to be adjusted on
the effective date of any change in such prime commercial lending rate but in no
event to be less than 6% per annum. In addition, the Fund hereby agrees that the
Custodian shall have a continuing lien and security interest in and to any
property specifically allocated to such Series at any time held by it for the
benefit of such Series or in which the Fund may have an interest which is then
in the Custodian's possession or control or in possession or control of any
third party acting in the Custodian's behalf. The Fund authorizes the 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 Series' credit on the Custodian's books.
20
2. The Fund will cause to be delivered to the Custodian by any
bank (including, if the borrowing is pursuant to a separate agreement, the
Custodian) from which it borrows money for investment or for temporary or
emergency purposes using Securities held by the Custodian hereunder as
collateral for such borrowings, a notice or undertaking in the form currently
employed by any such bank setting forth the amount which such bank will loan to
the Fund against delivery of a stated amount of collateral. The Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to each
such borrowing: (a) the Series 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 Investment Company Act of
1940 and the Fund's prospectus. The Custodian shall deliver on the borrowing
date specified in a Certificate 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 the Certificate. The 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. The Custodian shall deliver such Securities
as additional collateral as may be specified in a Certificate to collateralize
further any transaction described in this paragraph. The Fund shall cause all
Securities released from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that the Fund fails to specify
in a Certificate the Series, 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 the Custodian, the Custodian shall not be under any obligation to
deliver any Securities.
ARTICLE XV
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, neither the Custodian nor its
nominee shall be liable for any loss or dam age, including counsel fees,
resulting from its action or omission to act or otherwise, either hereunder or
under any Margin Account Agreement, except for any such loss or damage arising
out of its own negligence or willful misconduct. The Custodian may, with respect
to questions of law arising hereunder or under any Margin Account Agreement,
apply for and obtain the advice and opinion of counsel to the Fund, at the
expense of the Fund, provided the Custodian has received writ ten authorization
from the Fund to use the Fund's counsel, 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. The Custodian
shall be liable to the Fund for any loss or damage resulting from the use of the
Book-Entry System or any Depository arising by reason of any negligence,
misfeasance or willful misconduct on the part of the Custodian or any of its
employees or agents.
21
2. Without limiting the generality of the foregoing, the
Custodian shall be under no obligation to inquire into, and shall not be liable
for:
(a) The validity of the issue of any Securities
purchased, sold, or written by or for the Fund, the legality of the purchase,
sale or writing thereof, or the propriety of the amount paid or received
therefor;
(b) The legality of the sale or redemption of any Shares,
or the propriety of the amount to be received or paid therefor;
(c) The legality of the declaration or payment of any
dividend by the Fund;
(d) The legality of any borrowing by the Fund using
Securities as collateral;
(e) The legality of any loan of portfolio Securities, nor
shall the Custodian be 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 of the Fund
is adequate collateral for the Fund against any loss it might sustain as a
result of such loan. The Custodian specifically, but not by way of limitation,
shall not be under any duty or obligation periodically to check or notify the
Fund that the amount of such cash collateral held by it for the Fund is
sufficient collateral for the Fund, but such duty or obligation shall be the
sole responsibility of the Fund.
In addition, the Custodian shall be under no duty or obligation to see that any
broker, dealer or financial institution to which portfolio Securities of the
Fund are lent pursuant to Article XIV of this Agreement makes payment to it of
any dividends or interest which are payable to or for the account of the Fund
during the period of such loan or at the termination of such loan, provided,
however, that the Custodian shall promptly notify the Fund in the event that
such dividends or interest are not paid and received when due; or
(f) The sufficiency or value of any amounts of money
and/or Securities held in any Margin Account, Senior Security Account or
Collateral Account in connection with transactions by the Fund. In addition, the
Custodian shall be under no duty or obligation to see that any broker, dealer,
futures commission merchant 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, futures commission merchant or Clearing
Member, to see that any payment received by the Custodian from any broker,
dealer, futures commission merchant or Clearing Member is the amount the Fund is
entitled to receive, or to notify the Fund of the Custodian's receipt or
non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of the Fund
until the 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 the Depository.
4. The Custodian shall have no responsibility and shall not be
liable for ascertaining or acting upon any calls, conversions, exchange, offers,
tenders, interest rate changes or similar matters
22
relating to Securities held in the Depository, unless the Custodian shall have
actually received timely notice from the Depository. In no event shall the
Custodian have any responsibility or liability for the failure of the Depository
to collect, or for the late collection or late crediting by the Depository of
any amount payable upon Securities deposited in the Depository which may mature
or be redeemed, retired, called or otherwise become payable. However, upon
receipt of a Certificate from the Fund of an overdue amount on Securities held
in the Depository the Custodian shall make a claim against the Depository on
behalf of the Fund, except that the 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 the 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.
5. The Custodian shall not be under any duty or obligation to
take action to effect collection of any amount due to the Fund from the Transfer
Agent of the Fund nor to take any action to effect payment or distribution by
the Transfer Agent of the Fund of any amount paid by the Custodian to the
Transfer Agent of the Fund in accordance with this Agreement.
6. The 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 a Certificate and (ii) it shall be assured to its satisfaction of
reimbursement of its costs and expenses in connection with any such action.
7. The Custodian may appoint one or more banking institutions as
Depository or Depositories, as Sub-Custodian or Sub-Custodians, or as
Co-Custodian or Co-Custodians including, but not limited to, banking
institutions located in foreign countries, of Securities and moneys at any time
owned by the Fund, upon such terms and conditions as may be approved in a
Certificate or contained in an agreement executed by the Custodian, the Fund and
the appointed institution.
8. The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it, for
the account of the Fund and specifically allocated to a Series are such as
properly may be held by the Fund or such Series under the provisions of its then
current prospectus, or (b) to ascertain whether any transactions by the Fund,
whether or not involving the Custodian, are such transactions as may properly be
engaged in by the Fund.
9. The Custodian shall be entitled to receive and the Fund agrees
to pay to the Custodian all out-of-pocket expenses and such compensation as may
be agreed upon from time to time between the Custodian and the Fund. The
Custodian may charge such compensation and any expenses with respect to a series
incurred by the Custodian in the performance of its duties pursuant to such
agreement against any money specifically al located to such Series. Unless and
until the Fund instructs the Custodian by a Certificate to apportion any loss,
damage, liability or expense among the Series in a specified manner, the
Custodian shall also be entitled to charge against any money held by it for the
account of a Series such Series' pro rata share (based on such Series net asset
value at the time of the charge to the aggregate net asset value of all Series
at that time) of the amount of any loss, damage, liability or expense, including
counsel fees, for which it shall be entitled to reimbursement under the
provisions of this Agreement. The expenses for which the Custodian shall be
entitled to reimbursement hereunder shall include, but are not limited to, the
expenses of sub-
23
custodians and foreign branches of the Custodian incurred in settling outside of
New York City transactions involving the purchase and sale of Securities of the
Fund.
10. The Custodian shall be entitled to rely upon any Certificate,
notice or other instrument in writing received by the Custodian and reasonably
believed by the Custodian to be a Certificate. The Custodian shall be entitled
to rely upon any Oral Instructions and any Written Instructions actually
received by the Custodian hereinabove provided for. The Fund agrees to forward
to the Custodian a Certificate or facsimile thereof confirming such Oral
Instructions or Written Instructions in such manner so that such Certificate or
facsimile thereof is received by the 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 or Written Instructions are given to
the Custodian. The Fund agrees that the fact that such confirming instructions
are not received by the Custodian shall in no way affect the validity of the
transactions or enforceability of the transactions hereby authorized by the
Fund. The Fund agrees that the Custodian shall incur no liability to the Fund in
acting upon Oral Instructions or Written Instructions given to the Custodian
hereunder concerning such transactions provided such instructions reasonably
appear to have been received from an Authorized Person.
11. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to require into, and 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.
12. The books and records pertaining to the Fund which are in the
possession of the Custodian shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the Investment Company
Act of 1940, as amended, and other applicable securities laws and rules and
regulations. The Fund, or the Fund's authorized representatives, shall have
access to such books and records during the Custodian's normal business hours.
Upon the reasonable request of the Fund, copies of any such books and records
shall be provided by the Custodian to the Fund or the Fund's authorized
representative, and the Fund shall reimburse the Custodian its expenses of
providing such copies.
13. The Custodian shall provide the Fund with any report obtained
by the Custodian on the system of internal accounting control of the Book-Entry
System, the Depository, or O.C.C., and with such reports on its own systems of
internal accounting control as the Fund may reasonably request from time to
time.
14. Subject to the foregoing provisions of this Agreement, the
Custodian may deliver and receive Securities, and receipts with respect to such
Securities, and arrange for payments to be made and received by the Custodian in
accordance with the customs prevailing from time to time among brokers or
dealers in such Securities.
24
15. The Custodian shall have no 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 the Custodian.
ARTICLE XVI
TERMINATION
1. Either of the parties hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than sixty (60) days after the date of
giving of such notice. In the event such notice is given by the Fund, it shall
be accompanied by a copy of a resolution of the Board of Directors of the Fund,
certified by the Secretary or any Assistant Secretary, electing to terminate
this Agreement and designating a successor custodian or custodians, each of
which shall be a bank or trust company having not less than $2,000,000 aggregate
capital, surplus and undivided profits. In the event such notice is given by the
Custodian, the Fund shall, on or before the termination date, deliver to the
Custodian a copy of a resolution of the Board of Directors of the Fund,
certified by the Secretary or any Assistant Secretary, designating a successor
custodian or custodians. In the absence of such designation by the Fund, the
Custodian may designate a successor custodian which shall be a bank or trust
company having not less than $2,000,000 aggregate capital, surplus and undivided
profits. Upon the date set forth in such notice this Agreement shall terminate,
and the Custodian shall upon receipt of a notice of acceptance by the successor
custodian on that date deliver directly to the successor custodian all
Securities and moneys then owned by the Fund and held by it as Custodian, after
deducting all fees, expenses and other amounts for the payment or reimbursement
of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the
Custodian in accordance with the preceding paragraph, the Fund shall upon the
date specified in the notice of termination of this Agreement and upon the
delivery by the Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and moneys then owned
by the Fund be deemed to be its own custodian and the Custodian shall thereby be
relieved of all duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book Entry System which
cannot be delivered to the Fund to hold such Securities hereunder in accordance
with this Agreement.
ARTICLE XVII
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of
the present Officers of the Fund under its corporate seal, setting forth the
names and the signatures of the present Authorized Persons. The Fund agrees to
furnish to the Custodian a new Certificate in similar form in the event that any
such present Authorized Person ceases to be an Authorized Person or in the event
that other or additional Authorized Persons are elected or appointed. Until such
new Certificate shall be received, the Custodian shall be fully protected in
acting under the provisions of this Agreement upon Oral Instructions or
signatures of the present Authorized Persons as set forth in the last delivered
Certificate.
25
2. Annexed hereto as Appendix B is a Certificate signed by two of
the present Officers of the Fund under its corporate seal, setting forth the
names and the signatures of the present Officers of the Fund. The Fund agrees to
furnish to the Custodian a new Certificate in similar form in the event any such
present Officer ceases to be an Officer of the Fund, or in the event that other
or additional Officers are elected or appointed. Until such new Certificate
shall be received, the Custodian shall be fully protected in acting under the
provisions of this Agreement upon the signatures of the Officers as set forth in
the last delivered Certificate.
3. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, shall be sufficiently
given if addressed to the Custodian and mailed or delivered to it at its offices
at 00 Xxxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place as the
Custodian may from time to time designate in writing.
4. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Fund shall be sufficiently given
if addressed to the Fund and mailed or delivered to it at its office at the
address for the Fund first above written, or at such other place as the Fund may
from time to time designate in writing.
5. This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties with the same formality
as this Agreement and approved by a resolution of the Board of Directors of the
Fund.
6. This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by the Fund without the written
consent of the Custodian, or by the Custodian without the written consent of the
Fund, authorized or approved by a resolution of the Fund's Board of Directors.
7. This Agreement shall be construed in accordance with the laws
of the State of New York.
8. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
26
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate Officers, thereunto duly authorized and
their respective corporate seals to be hereunto affixed, as of the day and year
first above written.
XXXXXXXX COVERTIBLE FUND, INC.
By: /s/ Xxxxxx X. Xxxxxxxx, President
-------------------------------------
[SEAL]
Attest:
/s/ Xxxxxxx Xxxxxx, Secretary
-------------------------------------
THE BANK OF NEW YORK
By: /s/ Xxxxx Grunston, VP
-------------------------------------
[SEAL]
Attest:
/s/ Xxxxxxxx XxXxxxxxxx
-------------------------------------
27
