CUSTODIAN AGREEMENT
Between
THE PALLADIAN TRUST
and
INVESTORS BANK & TRUST COMPANY
TABLE OF CONTENTS
Page
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1. Bank Appointed Custodian ............................................. 1
2. Definitions .......................................................... 1
2.1 Authorized Person ...................................... 1
2.2 Security ............................................... 1
2.3 Portfolio Security ..................................... 1
2.4 Officers' Certificate .................................. 2
2.5 Book-Entry System ...................................... 2
2.6 Depository ............................................. 2
2.7 Proper Instructions .................................... 2
3. Separate Accounts .................................................... 2
4. Certification as to Authorized Persons ............................... 3
5. Custody of Cash ...................................................... 3
5.1 Purchase of Securities ................................. 3
5.2 Redemptions ............................................ 3
5.3 Distributions and Expenses of Fund ..................... 4
5.4 Payment in Respect of Securities ....................... 4
5.5 Repayment of Loans ..................................... 4
5.6 Repayment of Cash ...................................... 4
5.7 Foreign Exchange Transactions .......................... 4
5.8 Other Authorized Payments .............................. 4
5.9 Termination ............................................ 4
6. Securities ........................................................... 4
6.1 Segregation and Registration ........................... 4
6.2 Voting and Proxies ..................................... 5
6.3 Book-Entry System ...................................... 5
6.4 Use of a Depository .................................... 6
6.5 Use of Book-Entry System for Commercial Paper .......... 7
6.6 Use of Immobilization Programs ......................... 8
6.7 Eurodollar CDs ......................................... 8
6.8 Options and Futures Transactions ....................... 9
(a) Puts and Calls Traded on Securities Exchanges,
NASDAQ or Over-the-Counter ................... 9
(b) Puts, Calls, and Futures Traded
on Commodities Exchanges ..................... 9
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6.9 Segregated Account ..................................... 10
6.10 Interest Bearing Call or Time Deposits ................. 11
6.11 Transfer of Securities ................................. 11
7. Redemptions .......................................................... 13
8. Merger, Dissolution, etc. of Fund .................................... 13
9. Actions of Bank Without Prior Authorization .......................... 13
10. Collections and Defaults ............................................. 14
11. Maintenance of Records and Accounting Services ....................... 14
12. Fund Evaluation ...................................................... 15
13. Concerning the Bank .................................................. 15
13.1 Performance of Duties;
Standard of Care ...................................... 15
13.2 Agents and Subcustodians with Respect to Property
of the Fund Held in the United States ................. 16
13.3 Duties of the Bank with Respect to Property
Held Outside of the United States ..................... 16
13.4 Insurance .............................................. 20
13.5 Fees and Expenses of Bank .............................. 20
13.6 Advances by Bank ....................................... 20
14. Termination .......................................................... 20
15. Confidentiality ...................................................... 21
16. Notices .............................................................. 21
17. Amendments ........................................................... 22
18. Parties .............................................................. 22
19. Governing Law ........................................................ 22
20. Counterparts ......................................................... 22
21. Limitation of Liability .............................................. 22
CUSTODIAN AGREEMENT
AGREEMENT made as of this 29th day of September, 1995, between THE
PALLADIAN TRUST, a Massachusetts business trust (the "Fund") and INVESTORS
BANK & TRUST COMPANY (the "Bank").
The Fund, an open-end management investment company, desires to place
and maintain all of its portfolio securities and cash in the custody of the
Bank. The Bank has at least the minimum qualifications required by Section
17(f)(1) of the Investment Company Act of 1940 (the "1940 Act") to act as
custodian of the portfolio securities and cash of the Fund, and has indicated
its willingness to so act, subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. BANK APPOINTED CUSTODIAN. The Fund hereby appoints the Bank as
custodian of its portfolio securities and cash delivered to the Bank as
hereinafter described and the Bank agrees to act as such upon the terms and
conditions hereinafter set forth.
2. DEFINITIONS. Whenever used herein, the terms listed below will have
the following meaning:
2.1 AUTHORIZED PERSON. Authorized Person will mean any of the
persons duly authorized to give Proper Instructions or otherwise act on
behalf of the Fund by appropriate resolution of its Board of Directors or the
Board of Trustees as the case may be ("the Board"), and set forth in a
certificate as required by Section 4 hereof.
2.2 SECURITY. The term security as used herein will have the same
meaning as when such term is used in the Securities Act of 1933, as amended,
including, without limitation, any note, stock, treasury stock, bond,
debenture, evidence of indebtedness, certificate of interest or participation
in any profit sharing agreement, collateral-trust certificate,
preorganization certificate or subscription, transferable share, investment
contract, voting-trust certificate, certificate of deposit for a security,
fractional undivided interest in oil, gas, or other mineral rights, any put,
call, straddle, option, or privilege on any security, certificate of deposit,
or group or index of securities (including any interest therein or based on
the value thereof), or any put, call, straddle, option, or privilege entered
into on a national securities exchange relating to a foreign currency, or, in
general, any interest or instrument commonly known as a "security", or any
certificate of interest or participation in, temporary or interim certificate
for, receipt for, guarantee of, or warrant or right to subscribe to, or
option contract to purchase or sell any of the foregoing, and futures,
forward contracts and options thereon.
2.3 PORTFOLIO SECURITY. Portfolio Security will mean any Security
owned by the Fund.
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2.4 OFFICERS' CERTIFICATE. Officers' Certificate will mean, unless
otherwise indicated, any request, direction, instruction, or certification in
writing signed by any two Authorized Persons of the Fund.
2.5 BOOK-ENTRY SYSTEM. Book-Entry System shall mean the Federal
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank,
its successor or successors and its nominee or nominees.
2.6 DEPOSITORY. Depository shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934
("Exchange Act"), 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 1940 Act, its successor or
successors and its nominee or nominees, specifically identified in a
certified copy of a resolution of the Board.
2.7 PROPER INSTRUCTIONS. Proper Instructions shall mean (i)
instructions (which may be continuing instructions) regarding the purchase or
sale of Portfolio Securities, and payments and deliveries in connection
therewith, given by an Authorized Person as shall have been designated in an
Officers' Certificate, such instructions to be given in such form and manner
as the Bank and the Fund shall agree upon from time to time, and (ii)
instructions (which may be continuing instructions) regarding other matters
signed or initialed by such one or more persons from time to time designated
in an Officers' Certificate as having been authorized by the Board. Oral
instructions will be considered Proper Instructions if the Bank reasonably
believes them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The Fund shall cause
all oral instructions to be promptly confirmed in writing. The Bank shall act
upon and comply with any subsequent Proper Instruction which modifies a prior
instruction and the sole obligation of the Bank with respect to any follow-up
or confirmatory instruction shall be to make reasonable efforts to detect any
discrepancy between the original instruction and such confirmation and to
report such discrepancy to the Fund. The Fund shall be responsible, at the
Fund's expense, for taking any action, including any reprocessing, necessary
to correct any such discrepancy or error, and to the extent such action
requires the Bank to act the Fund shall give the Bank specific Proper
Instructions as to the action required. Upon receipt of an Officers'
Certificate as to the authorization by the Board accompanied by a detailed
description of procedures approved by the Fund, Proper Instructions may
include communication effected directly between electro-mechanical or
electronic devices provided that the Board and the Bank are satisfied that
such procedures afford adequate safeguards for the Fund's assets.
3. SEPARATE ACCOUNTS. If the Fund has more than one series or
portfolio, the Bank will segregate the assets of each series or portfolio to
which this Agreement relates into a separate account for each such series or
portfolio containing the assets of such series or portfolio (and all
investment earnings thereon). Unless the context otherwise requires, any
reference in this Agreement to any actions to be taken by the Fund shall be
deemed to refer to the Fund acting on behalf of one or more of its series,
any reference in this Agreement to any assets of the Fund, including, without
limitation, any Portfolio
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Securities and cash and earnings thereon, shall be deemed to refer only to
assets of the applicable series, any duty or obligation of the Bank hereunder
to the Fund shall be deemed to refer to duties and obligations with respect
to the individual series, and any obligation or liability of the Fund
hereunder shall be binding only with respect to the individual series, and
shall be discharged only out of the assets of such series.
4. CERTIFICATION AS TO AUTHORIZED PERSONS. The Secretary or Assistant
Secretary of the Fund will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank,
of (i) the names and signatures of the Authorized Persons and (ii) the names
of the members of the Board, it being understood that upon the occurrence of
any change in the information set forth in the most recent certification on
file (including without limitation any person named in the most recent
certification who is no longer an Authorized Person as designated therein),
the Secretary or Assistant Secretary of the Fund, will sign a new or amended
certification setting forth the change and the new, additional or omitted
names or signatures. The Bank will be entitled to rely and act upon any
Officers' Certificate given to it by the Fund which has been signed by
Authorized Persons named in the most recent certification.
5. CUSTODY OF CASH. As custodian for the Fund, the Bank will open and
maintain a separate account or accounts in the name of the Fund or in the
name of the Bank, as Custodian of the Fund, and will deposit to the account
of the Fund all of the cash of the Fund, except for cash held by a
subcustodian appointed pursuant to Section 13.2 or Section 13.3 hereof,
including borrowed funds, delivered to the Bank, subject only to draft or
order by the Bank acting pursuant to the terms of this Agreement. Upon
receipt by the Bank of Proper Instructions (which may be continuing
instructions) or in the case of payments for redemptions and repurchases of
outstanding shares of common stock of the Fund, notification from the Fund's
transfer agent as provided in Section 7, requesting such payment, designating
the payee or the account or accounts to which the Bank will release funds for
deposit, and stating that it is for a purpose permitted under the terms of
this Section 5, specifying the applicable subsection, the Bank will make
payments of cash held for the accounts of the Fund, insofar as funds are
available for that purpose, only as permitted in subsections 5.1-5.9 below.
5.1 PURCHASE OF SECURITIES. Upon the purchase of securities for the
Fund, against contemporaneous receipt of such securities by the Bank or,
against delivery of such securities to the Bank in accordance with generally
accepted settlement practices and customs in the jurisdiction or market in
which the transaction occurs, registered in the name of the Fund or in the
name of, or properly endorsed and in form for transfer to, the Bank, or a
nominee of the Bank, or receipt for the account of the Bank pursuant to the
provisions of Section 6 below, each such payment to be made at the purchase
price shown on a broker's confirmation (or transaction report in the case of
Book Entry Paper) of purchase of the securities received by the Bank before
such payment is made, as confirmed in the Proper Instructions received by the
Bank before such payment is made.
5.2 REDEMPTIONS. In such amount as may be necessary for the
repurchase or redemption of common shares of the Fund offered for repurchase
or redemption in accordance with Section 7 of this Agreement.
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5.3 DISTRIBUTIONS AND EXPENSES OF FUND. For the payment on the
account of the Fund of dividends or other distributions to shareholders as
may from time to time be declared by the Board, interest, taxes, management
or supervisory fees, distribution fees, fees of the Bank for its services
hereunder and reimbursement of the expenses and liabilities of the Bank as
provided hereunder, fees of any transfer agent, fees for legal, accounting,
and auditing services, or other operating expenses of the Fund.
5.4 PAYMENT IN RESPECT OF SECURITIES. For payments in connection
with the conversion, exchange or surrender of Portfolio Securities or
securities subscribed to by the Fund held by or to be delivered to the Bank.
5.5 REPAYMENT OF LOANS. To repay loans of money made to the Fund,
but, in the case of final payment, only upon redelivery to the Bank of any
Portfolio Securities pledged or hypothecated therefor and upon surrender of
documents evidencing the loan;
5.6 REPAYMENT OF CASH. To repay the cash delivered to the Fund for
the purpose of collateralizing the obligation to return to the Fund
certificates borrowed from the Fund representing Portfolio Securities, but
only upon redelivery to the Bank of such borrowed certificates.
5.7 FOREIGN EXCHANGE TRANSACTIONS. For payments in connection with
foreign exchange contracts or options to purchase and sell foreign currencies
for spot and future delivery which may be entered into by the Bank on behalf
of the Fund upon the receipt of Proper Instructions, such Proper Instructions
to specify the currency broker or banking institution (which may be the Bank,
or any other subcustodian or agent hereunder, acting as principal) with which
the contract or option is made, and the Bank shall have no duty with respect
to the selection of such currency brokers or banking institutions with which
the Fund deals or for their failure to comply with the terms of any contract
or option.
5.8 OTHER AUTHORIZED PAYMENTS. For other authorized transactions of
the Fund, or other obligations of the Fund incurred for proper Fund purposes;
provided that before making any such payment the Bank will also receive a
certified copy of a resolution of the Board signed by an Authorized Person
(other than the Person certifying such resolution) and certified by its
Secretary or Assistant Secretary, naming the person or persons to whom such
payment is to be made, and either describing the transaction for which
payment is to be made and declaring it to be an authorized transaction of the
Fund, or specifying the amount of the obligation for which payment is to be
made, setting forth the purpose for which such obligation was incurred and
declaring such purpose to be a proper corporate purpose.
5.9 TERMINATION: upon the termination of this Agreement as
hereinafter set forth pursuant to Section 8 and Section 14 of this Agreement.
6. SECURITIES.
6.1 SEGREGATION AND REGISTRATION. Except as otherwise provided
herein, and except for securities to be delivered to any subcustodian
appointed pursuant to Section 13.2 hereof, the Bank as custodian, will
receive and hold pursuant to the provisions hereof, in
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a separate account or accounts and physically segregated at all times from
those of other persons, any and all Portfolio Securities which may now or
hereafter be delivered to it by or for the account of the Fund. All such
Portfolio Securities will be held or disposed of by the Bank for, and subject
at all times to, the instructions of the Fund pursuant to the terms of this
Agreement. Subject to the specific provisions herein relating to Portfolio
Securities that are not physically held by the Bank, the Bank will register
all Portfolio Securities (unless otherwise directed by Proper Instructions or
an Officers' Certificate), in the name of a registered nominee of the Bank as
defined in the Internal Revenue Code and any Regulations of the Treasury
Department issued thereunder, and will execute and deliver all such
certificates in connection therewith as may be required by such laws or
regulations or under the laws of any state.
The Fund will from time to time furnish to the Bank appropriate
instruments to enable it to hold or deliver in proper form for transfer, or
to register in the name of its registered nominee, any Portfolio Securities
which may from time to time be registered in the name of the Fund.
6.2 VOTING AND PROXIES. Neither the Bank nor any nominee of the Bank
will vote any of the Portfolio Securities held hereunder, except in
accordance with Proper Instructions or an Officers' Certificate. The Bank
will execute and deliver, or cause to be executed and delivered, to the Fund
all notices, proxies and proxy soliciting materials with respect to such
Securities, such proxies to be executed by the registered holder of such
Securities (if registered otherwise than in the name of the Fund), but
without indicating the manner in which such proxies are to be voted.
6.3 BOOK-ENTRY SYSTEM. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits
of Fund assets in the Book-Entry System, and (ii) for any subsequent changes
to such arrangements following such approval, the Board has reviewed and
approved the arrangement and has not delivered an Officer's Certificate to
the Bank indicating that the Board has withdrawn its approval:
(a) The Bank may keep Portfolio Securities in the Book-Entry
System provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall not include
any assets of the Bank (or such agent) other than assets held as a fiduciary,
custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with respect
to the Fund's participation in the Book-Entry System through the Bank (or any
such agent) will identify by book entry Portfolio Securities which are
included with other securities deposited in the Account and shall at all
times during the regular business hours of the Bank (or such agent) be open
for inspection by duly authorized officers, employees or agents of the Fund.
Where securities are transferred to the Fund's account, the Bank shall also,
by book entry or otherwise, identify as belonging to the Fund a quantity of
securities in fungible bulk of securities (i) registered in the name of the
Bank or its nominee, or (ii) shown on the Bank's account on the books of the
Federal Reserve Bank;
(c) The Bank (or its agent) shall pay for Portfolio Securities
purchased for the account of the Fund or shall pay cash collateral against
the return of Portfolio Securities
6
loaned by the Fund upon (i) receipt of advice from the Book-Entry System that
such Portfolio Securities have been transferred to the Account, and (ii) the
making of an entry on the records of the Bank (or its agent) to reflect such
payment and transfer for the account of the Fund. The Bank (or its agent)
shall transfer securities sold or loaned for the account of the Fund upon
(i) receipt of advice from the Book-Entry System that
payment for securities sold or payment of the initial cash collateral against
the delivery of Portfolio Securities loaned by the Fund has been transferred
to the Account; and
(ii) the making of an entry on the records of the Bank (or
its agent) to reflect such transfer and payment for the account of the Fund.
Copies of all advices from the Book-Entry System of transfers of Securities
for the account of the Fund shall identify the Fund, be maintained for the
Fund by the Bank and shall be provided to the Fund at its request. The Bank
shall send the Fund a confirmation, as defined by Rule 17f-4 under the 1940
Act, of any transfers to or from the account of the Fund;
(d) The Bank will promptly provide the Fund with any report
obtained by the Bank or its agent on the Book-Entry System's accounting
system, internal accounting control and procedures for safeguarding
securities deposited in the Book-Entry System; and
(e) The Bank shall be liable to the Fund for any loss or
damage to the Fund resulting from use of the Book-Entry System by reason of
any gross negligence, willful misfeasance or bad faith of the Bank or any of
its agents or of any of its or their employees or from any reckless disregard
by the Bank or any such agent of its duty to use its best efforts to enforce
such rights as it may have against the Book-Entry System; at the election of
the Fund, it shall be entitled to be substituted for the Bank in any claim
against the Book-Entry System or any other person which the Bank or its agent
may have as a consequence of any such loss or damage if and to the extent
that the Fund has not been made whole for any loss or damage;
6.4 USE OF A DEPOSITORY. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits
in DTC or other such Depository and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive, exchange,
release, lend, deliver and otherwise deal with Portfolio Securities including
stock dividends, rights and other items of like nature, and to receive and
remit to the Bank on behalf of the Fund all income and other payments thereon
and to take all steps necessary and proper in connection with the collection
thereof;
(b) Registration of Portfolio Securities may be made in the
name of any nominee or nominees used by such Depository;
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(c) Payment for securities purchased and sold may be made
through the clearing medium employed by such Depository for transactions of
participants acting through it. Upon any purchase of Portfolio Securities,
payment will be made only upon delivery of the securities to or for the
account of the Fund and the Fund shall pay cash collateral against the return
of Portfolio Securities loaned by the Fund only upon delivery of the
Portfolio Securities to or for the account of the Fund; and upon any sale of
Portfolio Securities, delivery of the securities will be made only against
payment therefor or, in the event Portfolio Securities are loaned, delivery
of Portfolio Securities will be made only against receipt of the initial cash
collateral to or for the account of the Fund; and
(d) The Bank shall be liable to the Fund for any loss or
damage to the Fund resulting from use of a Depository by reason of any gross
negligence, willful misfeasance or bad faith of the Bank or its employees or
from any reckless disregard by the Bank of its duty to use its best efforts
to enforce such rights as it may have against a Depository. In this
connection, the Bank shall use its best efforts to ensure that:
(i) The Depository obtains replacement of any certificated
Portfolio Security deposited with it in the event such Security is lost,
destroyed, wrongfully taken or otherwise not available to be returned to the
Bank upon its request;
(ii) Any proxy materials received by a Depository with
respect to Portfolio Securities deposited with such Depository are forwarded
immediately to the Bank for prompt transmittal to the Fund;
(iii) Such Depository immediately forwards to the Bank
confirmation of any purchase or sale of Portfolio Securities and of the
appropriate book entry made by such Depository to the Fund's account;
(iv) Such Depository prepares and delivers to the Bank
such records with respect to the performance of the Bank's obligations and
duties hereunder as may be necessary for the Fund to comply with the
recordkeeping requirements of Section 31(a) of the 1940 Act and Rule 31(a)
thereunder; and
(v) Such Depository delivers to the Bank and the Fund all
internal accounting control reports, whether or not audited by an independent
public accountant, as well as such other reports as the Fund may reasonably
request in order to verify the Portfolio Securities held by such Depository.
6.5 USE OF BOOK-ENTRY SYSTEM FOR COMMERCIAL PAPER. Provided (i) the
Bank has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book-Entry Paper") and (ii) for each
year following such approval the Board has received and approved the
arrangements, upon receipt of Proper Instructions and upon receipt of
confirmation from an Issuer (as defined below) that the Fund has purchased
such Issuer's Book-entry Paper, the Bank shall issue and hold in book-entry
form, on behalf of the Fund, commercial paper issued by issuers with whom the
Bank has entered
8
into a book-entry agreement (the "Issuers"). In maintaining its Book-entry
Paper System, the Bank agrees that:
(a) the Bank will maintain all Book-Entry Paper held by the
Fund in an account of the Bank that includes only assets held by it for
customers;
(b) the records of the Bank with respect to the Fund's purchase
of Book-entry Paper through the Bank will identify, by book-entry, Commercial
Paper belonging to the Fund which is included in the Book-entry Paper System
and shall at all times during the regular business hours of the Bank be open
for inspection by duly authorized officers, employees or agents of the Fund;
(c) the Bank shall pay for Book-Entry Paper purchased for the
account of the Fund upon contemporaneous (i) receipt of advice from the
Issuer that such sale of Book-Entry Paper has been effected, and (ii) the
making of an entry on the records of the Bank to reflect such payment and
transfer for the account of the Fund;
(d) the Bank shall cancel such Book-Entry Paper obligation upon
the maturity thereof upon contemporaneous (i) receipt of advice that payment
for such Book-Entry Paper has been transferred to the Fund, and (ii) the
making of an entry on the records of the Bank to reflect such payment for the
account of the Fund;
(e) the Bank shall transmit to the Fund a transaction journal
confirming each transaction in Book-Entry Paper for the account of the Fund
on the next business day following the transaction; and
(f) the Bank will send to the Fund such reports on its system
of internal accounting control with respect to the Book-Entry Paper System as
the Fund may reasonably request from time to time.
6.6 USE OF IMMOBILIZATION PROGRAMS. Provided (i) the Bank has
received a certified copy of a resolution of the Board specifically approving
the maintenance of Portfolio Securities in an immobilization program operated
by a bank which meets the requirements of Section 26(a)(1) of the 1940 Act,
and (ii) for each year following such approval the Board has reviewed and
approved the arrangement and has not delivered an Officer's Certificate to
the Bank indicating that the Board has withdrawn its approval, the Bank shall
enter into such immobilization program with such bank acting as a
subcustodian hereunder.
6.7 EURODOLLAR CDs. Any Portfolio Securities which are
Eurodollar CDs may be physically held by the European branch of the U.S.
banking institution that is the issuer of such Eurodollar CD (a "European
Branch"), provided that such Securities are identified on the books of the
Bank as belonging to the Fund and that the books of the Bank identify the
European Branch holding such Securities. Notwithstanding any other provision
of this Agreement to the contrary, except as stated in the first sentence of
this subsection 6.7, the Bank shall be under no other duty with respect to
such Eurodollar CDs belonging to the Fund, and shall have no liability to the
Fund or its shareholders with respect to the actions, inactions, whether
negligent or otherwise of such European
9
Branch in connection with such Eurodollar CDs, except for any loss or damage
to the Fund resulting from the Bank's own gross negligence, willful
misfeasance or bad faith in the performance of its duties hereunder.
6.8 OPTIONS AND FUTURES TRANSACTIONS.
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ
or Over-the-Counter.
1. The Bank shall take action as to put options ("puts")
and call options ("calls") purchased or sold (written) by the Fund regarding
escrow or other arrangements (i) in accordance with the provisions of any
agreement entered into upon receipt of Proper Instructions between the Bank,
any broker-dealer registered under the Exchange Act and a member of the
National Association of Securities Dealers, Inc. (the "NASD"), and, if
necessary, the Fund relating to the compliance with the rules of the Options
Clearing Corporation and of any registered national securities exchange, or
of any similar organization or organizations.
2. Unless another agreement requires it to do so, the Bank
shall be under no duty or obligation to see that the Fund has deposited or is
maintaining adequate margin, if required, with any broker in connection with
any option, nor shall the Bank be under duty or obligation to present such
option to the broker for exercise unless it receives Proper Instructions from
the Fund. The Bank shall have no responsibility for the legality of any put
or call purchased or sold on behalf of the Fund, the propriety of any such
purchase or sale, or the adequacy of any collateral delivered to a broker in
connection with an option or deposited to or withdrawn from a Segregated
Account (as defined in subsection 6.9 below). The Bank specifically, but not
by way of limitation, shall not be under any duty or obligation to: (i)
periodically check or notify the Fund that the amount of such collateral held
by a broker or held in a Segregated Account is sufficient to protect such
broker of the Fund against any loss; (ii) effect the return of any collateral
delivered to a broker; or (iii) advise the Fund that any option it holds, has
or is about to expire. Such duties or obligations shall be the sole
responsibility of the Fund.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
1. The Bank shall take action as to puts, calls and
futures contracts ("Futures") purchased or sold by the Fund in accordance
with the provisions of any agreement among the Fund, the Bank and a Futures
Commission Merchant registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading Commission and/or
any Contract Market, or any similar organization or organizations, regarding
account deposits in connection with transactions by the Fund.
2. The responsibilities and liabilities of the Bank as to
futures, puts and calls traded on commodities exchanges, any Futures
Commission Merchant account and the Segregated Account shall be limited as
set forth in subparagraph (a)(2) of this Section 6.8 as if such subparagraph
referred to Futures Commission Merchants rather than brokers, and Futures and
puts and calls thereon instead of options.
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6.9 SEGREGATED ACCOUNT. The Bank shall upon receipt of Proper
Instructions establish and maintain a Segregated Account or Accounts for and
on behalf of the Fund.
1. Upon receipt of Proper Instructions cash and/or Portfolio
Securities may be transferred into the Segregated Account or Accounts:
(a) in accordance with the provisions of any agreement among
the Fund, the Bank and a broker-dealer registered under the Exchange Act and
a member of the NASD or any Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with the rules of the Options
Clearing Corporation and of any registered national securities exchange or
the Commodity Futures Trading Commission or any registered Contract Market,
or of any similar organizations regarding escrow or other arrangements in
connection with transactions by the Fund;
(b) for the purpose of segregating cash or securities in
connection with options purchased or written by the Fund or commodity futures
purchased or written by the Fund;
(c) for the deposit of liquid assets, such as cash, U.S.
Government securities or other high grade debt obligations, having a market
value (marked to market on a daily basis) at all times equal to not less than
the aggregate purchase price due on the settlement dates of all the Fund's
then outstanding forward commitment or "when-issued" agreements relating to
the purchase of Portfolio Securities and all the Fund's then outstanding
commitments under reverse repurchase agreements entered into with
broker-dealer firms;
(d) for the deposit of any Portfolio Securities which the Fund
has agreed to sell on a forward commitment basis, all in accordance with
Investment Company Act Release No. 10666;
(e) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of Segregated Accounts by registered investment
companies; or
(f) for other proper corporate purposes, but only, in the case
of this clause (f), upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board, or of the Executive Committee
signed by an officer of the Fund and certified by the Secretary or an
Assistant Secretary, setting forth the purpose or purposes of such Segregated
Account and declaring such purposes to be proper corporate purposes.
2. Upon receipt of Proper Instructions cash and/or Portfolio
Securities may be withdrawn from the Segregated Account or Accounts.
(a) in accordance with the provisions of any agreements
referenced in (a) or (b) above;
11
(b) for sale or delivery to meet the Fund's obligations
under outstanding firm commitment or when-issued agreements for
the purchase of Portfolio Securities and under reverse repurchase
agreements;
(c) for exchange for other liquid assets of equal or
greater value deposited in the Segregated Account;
(d) to the extent that the Fund's outstanding forward
commitment or when-issued agreements for the purchase of portfolio
securities or reverse repurchase agreements are sold to other
parties or the Fund's obligations thereunder are met from assets
of the Fund other than those in the Segregated Account; or
(e) for delivery upon settlement of a forward commitment
agreement for the sale of Portfolio Securities.
6.10 INTEREST BEARING CALL OR TIME DEPOSITS. The Bank shall, upon
receipt of Proper Instructions relating to the purchase by the Fund of
interest-bearing fixed-term and call deposits, transfer cash, by wire or
otherwise, in such amounts and to such bank or banks as shall be indicated in
such Proper Instructions. The Bank shall include in its records with respect
to the assets of the Fund appropriate notation as to the amount of each such
deposit, the banking institution with which such deposit is made (the
"Deposit Bank"), and shall retain such forms of advice or receipt evidencing
the deposit, if any, as may be forwarded to the Bank by the Deposit Bank.
Such deposits shall be deemed Portfolio Securities of the Fund and the
responsibility of the Bank therefore shall be the same as and no greater than
the Bank's responsibility in respect of other Portfolio Securities of the
Fund.
6.11 TRANSFER OF SECURITIES. The Bank will transfer, exchange,
deliver or release Portfolio Securities held by it hereunder, insofar as such
Securities are available for such purpose, provided that before making any
transfer, exchange, delivery or release under this Section the Bank will
receive Proper Instructions requesting such transfer, exchange or delivery
stating that it is for a purpose permitted under the terms of this Section
6.11, specifying the applicable subsection, or describing the purpose of the
transaction with sufficient particularity to permit the Bank to ascertain the
applicable subsection, only:
(a) upon sales of Portfolio Securities for the account of the
Fund, against contemporaneous receipt by the Bank of payment therefor in
full, or, against payment to the Bank in accordance with generally accepted
settlement practices and customs in the jurisdiction or market in which the
transaction occurs, each such payment to be in the amount of the sale price
shown in a broker's confirmation of sale of the Portfolio Securities received
by the Bank before such transfer is made, as confirmed in the Proper
Instructions received by the Bank before such transfer is made;
(b) in exchange for or upon conversion into other securities
alone or other securities and cash pursuant to any plan of merger,
consolidation, reorganization, share split-up, change in par value,
recapitalization or readjustment or otherwise, upon exercise of subscription,
purchase or sale or other similar rights represented by such Portfolio
12
Securities, or for the purpose of tendering shares in the event of a tender
offer therefor, provided however that in the event of an offer of exchange,
tender offer, or other exercise of rights requiring the physical tender or
delivery of Portfolio Securities, the Bank shall have no liability for
failure to so tender in a timely manner unless such Proper Instructions are
received by the Bank at least two business days prior to the date required
for tender, and unless the Bank (or its agent or subcustodian hereunder) has
actual possession of such Security at least two business days prior to the
date of tender;
(c) upon conversion of Portfolio Securities pursuant to their
terms into other securities;
(d) for the purpose of redeeming in kind shares of the Fund
upon authorization from the Fund;
(e) in the case of option contracts owned by the Fund, for
presentation to the endorsing broker;
(f) when such Portfolio Securities are called, redeemed or
retired or otherwise become payable;
(g) for the purpose of effectuating the pledge of Portfolio
Securities held by the Bank in order to collateralize loans made to the Fund
by any bank, including the Bank; provided, however, that such Portfolio
Securities will be released only upon payment to the Bank for the account of
the Fund of the moneys borrowed, except that in cases where additional
collateral is required to secure a borrowing already made, and such fact is
made to appear in the Proper Instructions, further Portfolio Securities may
be released for that purpose without any such payment. In the event that any
such pledged Portfolio Securities are held by the Bank, they will be so held
for the account of the lender, and after notice to the Fund from the lender
in accordance with the normal procedures of the lender, that an event of
deficiency or default on the loan has occurred, the Bank may deliver such
pledged Portfolio Securities to or for the account of the lender;
(h) for the purpose of releasing certificates representing
Portfolio Securities, against contemporaneous receipt by the Bank of the fair
market value of such security, as set forth in the Proper Instructions
received by the Bank before such payment is made;
(i) for the purpose of delivering securities lent by the Fund
to a bank or broker dealer, but only against receipt in accordance with
street delivery custom except as otherwise provided herein, of adequate
collateral as agreed upon from time to time by the Fund and the Bank, and
upon receipt of payment in connection with any repurchase agreement relating
to such securities entered into by the Fund;
(j) for other authorized transactions of the Fund or for other
proper corporate purposes; provided that before making such transfer, the
Bank will also receive a certified copy of resolutions of the Board, signed
by an authorized officer of the Fund (other than the officer certifying such
resolution) and certified by its Secretary or Assistant Secretary, specifying
the Portfolio Securities to be delivered, setting forth the transaction in or
purpose for which such delivery is to be made, declaring such transaction to
be an
13
authorized transaction of the Fund or such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made; and
(k) upon termination of this Agreement as hereinafter set
forth pursuant to Section 8 and Section 14 of this Agreement.
As to any deliveries made by the Bank pursuant to subsections (a), (b),
(c), (e), (f), (g), (h) and (i) securities or cash receivable in exchange
therefor shall be delivered to the Bank.
7. REDEMPTIONS. In the case of payment of assets of the Fund held by
the Bank in connection with redemptions and repurchases by the Fund of
outstanding common shares, the Bank will rely on notification by the Fund's
transfer agent of receipt of a request for redemption and certificates, if
issued, in proper form for redemption before such payment is made. Payment
shall be made in accordance with the Articles and By-laws of the Fund, from
assets available for said purpose.
8. MERGER, DISSOLUTION, ETC. OF FUND. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of
the Fund into or the consolidation of the Fund with another investment
company where the Fund is not the surviving entity, the sale by the Fund of
all, or substantially all, of its assets to another investment company, or
the liquidation or dissolution of the Fund and distribution of its assets,
the Bank will deliver the Portfolio Securities held by it under this
Agreement and disburse cash only upon the order of the Fund set forth in an
Officers' Certificate, accompanied by a certified copy of a resolution of the
Board authorizing any of the foregoing transactions. Upon completion of such
delivery and disbursement and the payment of the fees, disbursements and
expenses of the Bank, this Agreement will terminate.
9. ACTIONS OF BANK WITHOUT PRIOR AUTHORIZATION. Notwithstanding
anything herein to the contrary, unless and until the Bank receives an
Officers' Certificate to the contrary, it will without prior authorization or
instruction of the Fund or the transfer agent:
9.1 Endorse for collection and collect on behalf of and in the
name of the Fund all checks, drafts, or other negotiable or transferable
instruments or other orders for the payment of money received by it for the
account of the Fund and hold for the account of the Fund all income,
dividends, interest and other payments or distribution of cash with respect
to the Portfolio Securities held thereunder;
9.2 Present for payment all coupons and other income items
held by it for the account of the Fund which call for payment upon
presentation and hold the cash received by it upon such payment for the
account of the Fund;
9.3 Receive and hold for the account of the Fund all
securities received as a distribution on Portfolio Securities as a result of
a stock dividend, share split-up, reorganization, recapitalization, merger,
consolidation, readjustment, distribution of rights and similar securities
issued with respect to any Portfolio Securities held by it hereunder;
14
9.4 Execute as agent on behalf of the Fund all necessary
ownership and other certificates and affidavits required by the Internal
Revenue Code or the regulations of the Treasury Department issued thereunder,
or by the laws of any state, now or hereafter in effect, inserting the Fund's
name on such certificates as the owner of the securities covered thereby, to
the extent it may lawfully do so and as may be required to obtain payment in
respect thereof. The Bank will execute and deliver such certificates in
connection with Portfolio Securities delivered to it or by it under this
Agreement as may be required under the provisions of the Internal Revenue
Code and any Regulations of the Treasury Department issued thereunder, or
under the laws of any state;
9.5 Present for payment all Portfolio Securities which are
called, redeemed, retired or otherwise become payable, and hold cash received
by it upon payment for the account of the Fund; and
9.6 Exchange interim receipts or temporary securities for
definitive securities.
10. COLLECTIONS AND DEFAULTS. The Bank will use all reasonable efforts
to collect any funds which may to its knowledge become collectible arising
from Portfolio Securities, including dividends, interest and other income,
and to transmit to the Fund notice actually received by it of any call for
redemption, offer of exchange, right of subscription, reorganization or other
proceedings affecting such Securities. If Portfolio Securities upon which
such income is payable are in default or payment is refused after due demand
or presentation, the Bank will notify the Fund in writing of any default or
refusal to pay within two business days from the day on which it receives
knowledge of such default or refusal. In addition, the Bank will send the
Fund a written report once each month showing any income on any Portfolio
Security held by it which is more than ten days overdue on the date of such
report and which has not previously been reported.
11. MAINTENANCE OF RECORDS AND ACCOUNTING SERVICES. The Bank will
maintain records with respect to transactions for which the Bank is
responsible pursuant to the terms and conditions of this Agreement, and in
compliance with the applicable rules and regulations of the 1940 Act and will
furnish the Fund daily with a statement of condition of the Fund. The Bank
will furnish to the Fund at the end of every month, and at the close of each
quarter of the Fund's fiscal year, a list of the Portfolio Securities and the
aggregate amount of cash held by it for the Fund. The books and records of
the Bank pertaining to its actions under this Agreement and reports by the
Bank or its independent accountants concerning its accounting system,
procedures for safeguarding securities and internal accounting controls will
be open to inspection and audit at reasonable times by officers of or
auditors employed by the Fund and will be preserved by the Bank in the manner
and in accordance with the applicable rules and regulations under the 1940
Act.
The Bank shall keep the books of account and render statements or
copies from time to time as reasonably requested by the Treasurer or any
executive officer of the Fund.
The Bank shall assist generally in the preparation of reports to
shareholders and others, audits of accounts, and other ministerial matters of
like nature.
15
The books and records maintained by the Bank on behalf of the Fund are
the property of the Fund and will be surrendered upon request in accordance
with Section 14.
12. FUND EVALUATION. The Bank shall compute and, unless otherwise
directed by the Board, determine as of the close of business on the New York
Stock Exchange on each day on which said Exchange is open for unrestricted
trading and as of such other hours, if any, as may be authorized by the Board
the net asset value and the public offering price of a share of capital stock
of the Fund, such determination to be made in accordance with the provisions
of the Articles and By-laws of the Fund and Prospectus and Statement of
Additional Information relating to the Fund, as they may from time to time be
amended, and any applicable resolutions of the Board at the time in force and
applicable; and promptly to notify the Fund, the proper exchange and the NASD
or such other persons as the Fund may request of the results of such
computation and determination. In computing the net asset value hereunder,
the Bank may rely in good faith upon information furnished to it by any
Authorized Person in respect of (i) the manner of accrual of the liabilities
of the Fund and in respect of liabilities of the Fund not appearing on its
books of account kept by the Bank, (ii) reserves, if any, authorized by the
Board or that no such reserves have been authorized, (iii) the source of the
quotations to be used in computing the net asset value, (iv) the value to be
assigned to any security for which no price quotations are available, and (v)
the method of computation of the public offering price on the basis of the
net asset value of the shares, and the Bank shall not be responsible for any
loss occasioned by such reliance or for any good faith reliance on any
quotations received from a source pursuant to (iii) above.
13. CONCERNING THE BANK.
13.1 PERFORMANCE OF DUTIES AND STANDARD OF CARE.
In performing its duties hereunder and any other duties listed on any
Schedule hereto, if any, the Bank will be entitled to receive and act upon the
advice of independent counsel of its own selection, which may be counsel for the
Fund, and will be without liability for any action taken or thing done or
omitted to be done in accordance with this Agreement in good faith in conformity
with such advice. In the performance of its duties hereunder, the Bank will be
protected and not be liable, and will be indemnified and held harmless for any
action taken or omitted to be taken by it in good faith reliance upon the terms
of this Agreement, any Officers' Certificate, Proper Instructions, resolution of
the Board, telegram, notice, request, certificate or other instrument reasonably
believed by the Bank to be genuine and for any other loss to the Fund except in
the case of its gross negligence, willful misfeasance or bad faith in the
performance of its duties or reckless disregard of its obligations and duties
hereunder.
The Bank will be under no duty or obligation to inquire into and will
not be liable for:
(a) the validity of the issue of any Portfolio Securities
purchased by or for the Fund, the legality of the purchases thereof or the
propriety of the price incurred therefor;
(b) the legality of any sale of any Portfolio Securities by or
for the Fund or the propriety of the amount for which the same are sold;
16
(c) the legality of an issue or sale of any common shares of
the Fund or the sufficiency of the amount to be received therefor;
(d) the legality of the repurchase of any common shares of the
Fund or the propriety of the amount to be paid therefor;
(e) the legality of the declaration of any dividend by the Fund
or the legality of the distribution of any Portfolio Securities as payment in
kind of such dividend; and
(f) any property or moneys of the Fund unless and until
received by it, and any such property or moneys delivered or paid by it
pursuant to the terms hereof.
Moreover, the Bank will not be under any duty or obligation to
ascertain whether any Portfolio Securities at any time delivered to or held
by it for the account of the Fund are such as may properly be held by the
Fund under the provisions of its Articles, By-laws, any federal or state
statutes or any rule or regulation of any governmental agency.
Notwithstanding anything in this Agreement to the contrary, in no event
shall the Bank be liable hereunder or to any third party:
(a) for any losses or damages of any kind resulting from acts
of God, earthquakes, fires, floods, storms or other disturbances of nature,
epidemics, strikes, riots, nationalization, expropriation, currency
restrictions, acts of war, civil war or terrorism, insurrection, nuclear
fusion, fission or radiation, the interruption, loss or malfunction of
utilities, transportation, or computers (hardware or software) and computer
facilities, the unavailability of energy sources and other similar happenings
or events except as results from the Bank's own gross negligence; or
(b) for special, punitive or consequential damages arising from
the provision of services hereunder, even if the Bank has been advised of the
possibility of such damages.
13.2 AGENTS AND SUBCUSTODIANS WITH RESPECT TO PROPERTY OF THE FUND
HELD IN THE UNITED STATES. The Bank may employ agents in the performance of
its duties hereunder and shall be responsible for the acts and omissions of
such agents as if performed by the Bank hereunder.
Upon receipt of Proper Instructions, the Bank may employ certain
subcustodians, provided that any such subcustodian meets at least the minimum
qualifications required by Section 17(f)(1) of the 1940 Act to act as a
custodian of the Fund's assets with respect to property of the Fund held in
the United States. The Bank shall have no liability to the Fund or any other
person by reason of any act or omission of such subcustodian and the Fund
shall indemnify the Bank and hold it harmless from and against any and all
actions, suits and claims, arising directly or indirectly out of the
performance of such subcustodian. Upon request of the Bank, the Fund shall
assume the entire defense of any action, suit, or claim subject to the
foregoing indemnity. The Fund shall pay all fees and expenses of such
subcustodian.
17
13.3 DUTIES OF THE BANK WITH RESPECT TO PROPERTY OF THE FUND
HELD OUTSIDE OF THE UNITED STATES.
(a) APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Fund hereby
authorizes and instructs the Bank to employ as sub-custodians for the Fund's
Portfolio Securities and other assets maintained outside the United States
the foreign banking institutions and foreign securities depositories
designated on the Schedule attached hereto (each, a "Selected Foreign
Sub-Custodian"). Upon receipt of Proper Instructions, together with a
certified resolution of the Fund's Board of Trustees, the Bank and the Fund
may agree to designate additional foreign banking institutions and foreign
securities depositories to act as Selected Foreign Sub-Custodians hereunder.
Upon receipt of Proper Instructions, the Fund may instruct the Bank to cease
the employment of any one or more such Selected Foreign Sub-Custodians for
maintaining custody of the Fund's assets, and the Bank shall so cease to
employ such sub-custodian as soon as alternate custodial arrangements have
been implemented.
(b) FOREIGN SECURITIES DEPOSITORIES. Except as may otherwise
be agreed upon in writing by the Bank and the Fund, assets of the Fund shall
be maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as Selected Foreign
Sub-Custodians pursuant to the terms hereof. Where possible, such
arrangements shall include entry into agreements containing the provisions
set forth in subparagraph (d) hereof. Notwithstanding the foregoing, except
as may otherwise be agreed upon in writing by the Bank and the Fund, the Fund
authorizes the deposit in Euro-clear, the securities clearance and depository
facilities operated by Xxxxxx Guaranty Trust Company of New York in Brussels,
Belgium, of Foreign Portfolio Securities eligible for deposit therein and to
utilize such securities depository in connection with settlements of
purchases and sales of securities and deliveries and returns of securities,
until notified to the contrary pursuant to subparagraph (a) hereunder.
(c) SEGREGATION OF SECURITIES. The Bank shall identify on its
books as belonging to the Fund the Foreign Portfolio Securities held by each
Selected Foreign Sub-Custodian. Each agreement pursuant to which the Bank
employs a foreign banking institution shall require that such institution
establish a custody account for the Bank and hold in that account, Foreign
Portfolio Securities and other assets of the Fund, and, in the event that
such institution deposits Foreign Portfolio Securities in a foreign
securities depository, that it shall identify on its books as belonging to
the Bank the securities so deposited.
(d) AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each of the
agreements pursuant to which a foreign banking institution holds assets of
the Fund (each, a "Foreign Sub-Custodian Agreement") shall be substantially
in the form previously made available to the Fund and shall provide that: (a)
the Fund's assets will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of the foreign banking
institution or its creditors or agent, except a claim of payment for their
safe custody or administration (including, without limitation, any fees or
taxes payable upon transfers or reregistration of securities); (b) beneficial
ownership of the Fund's assets will be freely transferable without the
payment of money or value other than for custody or administration
(including, without limitation, any fees or taxes payable upon transfers or
18
reregistration of securities); (c) adequate records will be maintained
identifying the assets as belonging to Bank; (d) officers of or auditors
employed by, or other representatives of the Bank, including to the extent
permitted under applicable law, the independent public accountants for the
Fund, will be given access to the books and records of the foreign banking
institution relating to its actions under its agreement with the Bank; and
(e) assets of the Fund held by the Selected Foreign Sub-Custodian will be
subject only to the instructions of the Bank or its agents.
(e) ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon
request of the Fund, the Bank will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books and
records of any foreign banking institution employed as a Selected Foreign
Sub-Custodian insofar as such books and records relate to the performance of
such foreign banking institution under its Foreign Sub-Custodian Agreement.
(f) REPORTS BY BANK. The Bank will supply to the Fund from
time to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Fund held by Selected Foreign
Sub-Custodians, including but not limited to an identification of entities
having possession of the Foreign Portfolio Securities and other assets of the
Fund.
(g) TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. Transactions with
respect to the assets of the Fund held by a Selected Foreign Sub-Custodian
shall be effected pursuant to Proper Instructions from the Fund to the Bank
and shall be effected in accordance with the applicable Foreign Sub-Custodian
Agreement. If at any time any Foreign Portfolio Securities shall be
registered in the name of the nominee of the Selected Foreign Sub-Custodian,
the Fund agrees to hold any such nominee harmless from any liability by
reason of the registration of such securities in the name of such nominee.
Notwithstanding any provision of this Agreement to the
contrary, settlement and payment for Foreign Portfolio Securities received
for the account of the Fund and delivery of Foreign Portfolio Securities
maintained for the account of the Fund may be effected in accordance with the
customary established securities trading or securities processing practices
and procedures in the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to the purchaser thereof
or to a dealer therefor (or an agent for such purchaser or dealer) against a
receipt with the expectation of receiving later payment for such securities
from such purchaser or dealer.
In connection with any action to be taken with respect to the
Foreign Portfolio Securities held hereunder, including, without limitation,
the exercise of any voting rights, subscription rights, redemption rights,
exchange rights, conversion rights or tender rights, or any other action in
connection with any other right, interest or privilege with respect to such
Securities (collectively, the "Rights"), the Bank shall promptly transmit to
the Fund such information in connection therewith as is made available to the
Bank by the Foreign Sub-Custodian, and shall promptly forward to the
applicable Foreign Sub-Custodian any instructions, forms or certifications
with respect to such Rights, and any instructions relating to the actions to
be taken in connection therewith, as the Bank shall receive from the Fund
pursuant to Proper Instructions. Notwithstanding the foregoing, the Bank
shall have no further duty or obligation with respect to such Rights,
including, without
19
limitation, the determination of whether the Fund is entitled to participate
in such Rights under applicable U.S. and foreign laws, or the determination
of whether any action proposed to be taken with respect to such Rights by the
Fund or by the applicable Foreign Sub-Custodian will comply with all
applicable terms and conditions of any such Rights or any applicable laws or
regulations, or market practices within the market in which such action is to
be taken or omitted.
(h) LIABILITY OF SELECTED FOREIGN SUB-CUSTODIANS. Each Foreign
Sub-Custodian Agreement with a foreign banking institution shall require the
institution to exercise reasonable care in the performance of its duties and
to indemnify, and hold harmless, the Bank and each Fund from and against
certain losses, damages, costs, expenses, liabilities or claims arising out
of or in connection with the institution's performance of such obligations,
all as set forth in the applicable Foreign Sub-Custodian Agreement. The Fund
acknowledges that the Bank, as a participant in Euro-clear, is subject to the
Terms and Conditions Governing the Euro-Clear System, a copy of which has
been made available to the Fund. The Fund acknowledges that pursuant to such
Terms and Conditions, Xxxxxx Guaranty Brussels shall have the sole right to
exercise or assert any and all rights or claims in respect of actions or
omissions of, or the bankruptcy or insolvency of, any other depository,
clearance system or custodian utilized by Euro-clear in connection with the
Fund's securities and other assets.
(i) LIABILITY OF BANK. The Bank shall have no more or less
responsibility or liability on account of the acts or omissions of any
Selected Foreign Sub-Custodian employed hereunder than any such Selected
Foreign Sub-Custodian has to the Bank and, without limiting the foregoing,
the Bank shall not be liable for any loss, damage, cost, expense, liability
or claim resulting from nationalization, expropriation, currency
restrictions, or acts of war or terrorism, political risk (including, but not
limited to, exchange control restrictions, confiscation, insurrection, civil
strife or armed hostilities) other losses due to Acts of God, nuclear
incident or any loss where the Selected Foreign Sub-Custodian has otherwise
exercised reasonable care.
(j) MONITORING RESPONSIBILITIES. The Bank shall furnish
annually to the Fund, information concerning the Selected Foreign
Sub-Custodians employed hereunder for use by the Fund in evaluating such
Selected Foreign Sub-Custodians to ensure compliance with the requirements of
Rule 17f-5 of the Act. In addition, the Bank will promptly inform the Fund in
the event that the Bank is notified by a Selected Foreign Sub-Custodian that
there appears to be a substantial likelihood that its shareholders' equity
will decline below $200 million (U.S. dollars or the equivalent thereof) or
that its shareholders' equity has declined below $200 million (in each case
computed in accordance with generally accepted U.S. accounting principles) or
any other capital adequacy test applicable to it by exemptive order, or if
the Bank has actual knowledge of any material loss of the assets of the Fund
held by a Foreign Sub-Custodian.
(k) TAX LAW. The Bank shall have no responsibility or
liability for any obligations now or hereafter imposed on the Fund or the
Bank as custodian of the Fund by the tax laws of any jurisdiction, and it
shall be the responsibility of the Fund to notify the Bank of the obligations
imposed on the Fund or the Bank as the custodian of the Fund by the tax law
of any non-U.S. jurisdiction, including responsibility for withholding and
20
other taxes, assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Custodian with regard
to such tax law shall be to use reasonable efforts to assist the Fund with
respect to any claim for exemption or refund under the tax law of
jurisdictions for which the Fund has provided such information.
13.4 INSURANCE. The Bank shall use the same care with respect to the
safekeeping of Portfolio Securities and cash of the Fund held by it as it
uses in respect of its own similar property but it need not maintain any
special insurance for the benefit of the Fund.
13.5. FEES AND EXPENSES OF BANK. The Fund will pay or reimburse the
Bank from time to time for any transfer taxes payable upon transfer of
Portfolio Securities made hereunder, and for all necessary proper
disbursements, expenses and charges made or incurred by the Bank in the
performance of this Agreement (including any duties listed on any Schedule
hereto, if any) including any indemnities for any loss, liabilities or
expense to the Bank as provided above. For the services rendered by the Bank
hereunder, the Fund will pay to the Bank such compensation or fees at such
rate and at such times as shall be agreed upon in writing by the parties from
time to time. The Bank will also be entitled to reimbursement by the Fund for
all reasonable expenses incurred in conjunction with termination of this
Agreement by the Fund.
13.6 ADVANCES BY BANK. The Bank may, in its sole discretion, advance
funds on behalf of the Fund to make any payment permitted by this Agreement
upon receipt of any proper authorization required by this Agreement for such
payments by the Fund. Should such a payment or payments, with advanced funds,
result in an overdraft (due to insufficiencies of the Fund's account with the
Bank, or for any other reason) this Agreement deems any such overdraft or
related indebtedness, a loan made by the Bank to the Fund payable on demand
and bearing interest at the current rate charged by the Bank for such loans
unless the Fund shall provide the Bank with agreed upon compensating
balances. The Fund agrees that the Bank shall have a continuing lien and
security interest to the extent of any overdraft or indebtedness, in and to
any property at any time held by it for the Fund's benefit or in which the
Fund has an interest and which is then in the Bank's possession or control
(or in the possession or control of any third party acting on the Bank's
behalf). The Fund authorizes the Bank, in its sole discretion, at any time to
charge any overdraft or indebtedness, together with interest due thereon
against any balance of account standing to the credit of the Fund on the
Bank's books.
14. TERMINATION.
14.1 This Agreement may be terminated at any time by the Fund after
December 31, 1998, without penalty upon sixty days written notice delivered
by either party to the other by means of registered mail, and upon the
expiration of such sixty days this Agreement will terminate; provided,
however, that the effective date of such termination may be postponed to a
date not more than ninety days from the date of delivery of such notice (i)
by the Bank in order to prepare for the transfer by the Bank of all of the
assets of the Fund held hereunder, and (ii) by the Fund in order to give the
Fund an opportunity to make suitable arrangements for a successor custodian.
At any time after the termination of this Agreement, the Fund will, at its
request, have access to the records of the Bank relating to the performance
of its duties as custodian.
21
14.2 In the event of the termination of this Agreement, the Bank
will immediately upon receipt or transmittal, as the case may be, of notice
of termination, commence and prosecute diligently to completion the transfer
of all cash and the delivery of all Portfolio Securities duly endorsed and
all records maintained under Section 11 to the successor custodian when
appointed by the Fund. The obligation of the Bank to deliver and transfer
over the assets of the Fund held by it directly to such successor custodian
will commence as soon as such successor is appointed and will continue until
completed as aforesaid. If the Fund does not select a successor custodian
within ninety (90) days from the date of delivery of notice of termination
the Bank may, subject to the provisions of subsection (14.3), deliver the
Portfolio Securities and cash of the Fund held by the Bank to a bank or trust
company of its own selection which meets the requirements of Section 17(f)(1)
of the 1940 Act and has a reported capital, surplus and undivided profits
aggregating not less than $2,000,000, to be held as the property of the Fund
under terms similar to those on which they were held by the Bank, whereupon
such bank or trust company so selected by the Bank will become the successor
custodian of such assets of the Fund with the same effect as though selected
by the Board.
14.3 Prior to the expiration of ninety (90) days after notice of
termination has been given, the Fund may furnish the Bank with an order of
the Fund advising that a successor custodian cannot be found willing and able
to act upon reasonable and customary terms and that there has been submitted
to the shareholders of the Fund the question of whether the Fund will be
liquidated or will function without a custodian for the assets of the Fund
held by the Bank. In that event the Bank will deliver the Portfolio
Securities and cash of the Fund held by it, subject as aforesaid, in
accordance with one of such alternatives which may be approved by the
requisite vote of shareholders, upon receipt by the Bank of a copy of the
minutes of the meeting of shareholders at which action was taken, certified
by the Fund's Secretary and an opinion of counsel to the Fund in form and
content satisfactory to the Bank.
15. CONFIDENTIALITY. Both parties hereto agree that any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed to any other person without the consent of the other
party, except as may be required by applicable law or at the request of a
governmental agency. The parties further agree that a breach of this
provision would irreparably damage the other party and accordingly agree that
each of them is entitled, without bond or other security, to an injunction or
injunctions to prevent breaches of this provision.
16. NOTICES. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and mailed or delivered to it
at its office at the address set forth below; namely:
(a) In the case of notices sent to the Fund to:
The Palladian Trust
0000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xx Xxxxx, Xxxxxxxxxx 00000
Attn.: President
22
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention:
or at such other place as such party may from time to time designate in
writing.
17. AMENDMENTS. This Agreement may not be altered or amended, except by
an instrument in writing, executed by both parties, and in the case of the
Fund, such alteration or amendment will be authorized and approved by its
Board.
18. PARTIES. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Fund
without the written consent of the Bank or by the Bank without the written
consent of the Fund, authorized and approved by its Board; and provided
further that termination proceedings pursuant to Section 14 hereof will not
be deemed to be an assignment within the meaning of this provision.
19. GOVERNING LAW. This Agreement and all performance hereunder will be
governed by the laws of the Commonwealth of Massachusetts.
20. COUNTERPARTS. 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.
21. LIMITATION OF LIABILITY. A copy of the Agreement and Declaration of
Trust of the Fund is on file with the Secretary of State of the Commonwealth
of Massachusetts and notice is hereby given that this Agreement has been
executed on behalf of the Fund by an officer of the Fund as an officer and
not individually and the obligations of the Fund arising out of this
Agreement are not binding upon any of the trustees, officers, or shareholders
of the Fund individually but are binding only upon the assets and property of
the Fund.
23
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
day and year first written above.
The Palladian Trust
By: /s/ H. Xxxxxxx Xxxxxxxx
------------------------------
Name: H. Xxxxxxx Xxxxxxxx
Title: President
ATTEST:
/s/ Xxxx X. Xxxx
--------------------
Investors Bank & Trust Company
By: /s/ Xxxxx X. Xxxxx
------------------------------
Name:
Title: Director
ATTEST:
--------------------
DATE:
---------------
PALLADIAN ADVISORS, INC.
ANNUAL FEE SCHEDULE
FOR THE EIGHT PALLADIAN FUNDS
MAY 11, 1995
================================================================================
FUND ACCOUNTING (INCLUDING CALCULATION OF N.A.V.) AND DOMESTIC & FOREIGN
CUSTODY
================================================================================
A. DOMESTIC CUSTODY
The annual fee for each domestic fund will be charged either basis
points or a minimum, whichever is higher. There will be no minimum fee
charge for the first twelve months after the funds are launched. The
following schedules are exclusive of transaction costs, global custody
fees and out-of-pocket expenses:
ANNUAL FEE
----------
TOTAL DOMESTIC NET ASSETS 1 BASIS POINT
The monthly minimum for each fund will be $500 for months 13 to 18 and
$1,000 for every month thereafter.
B. FUND ACCOUNTING
The annual fee for each fund (domestic or global) will be charged either
basis points or the minimum, whichever is higher. The following
schedules are exclusive of transaction costs, global custody fees and
out-of pocket expenses.
ANNUAL FEE
----------
FIRST $600 MILLION OF NET ASSETS 5 BASIS POINTS
NET ASSETS IN EXCESS OF $600 MILLION 3 BASIS POINTS
The yearly minimum fee for each fund is $40,000
C. TRANSACTION COSTS PER TRANSACTION
---------------
DTC $ 12.00
FED BOOK ENTRY 12.00
NON-DTC, BOSTON SETTLEMENTS 20.00 *
NON-DTC, NEW YORK SETTLEMENTS 35.00
NON-DTC, NEW YORK MATURITIES 10.00
GNMA SECURITIES 35.00
GOVERNMENT PAYDOWN 5.00
FUTURES 18.00
FOREIGN EXCHANGE CONTRACT 18.00
INCOMING WIRES 5.00
OUTGOING WIRES 7.50
* THERE IS NO CHARGE FOR MATURITIES OF THESE ITEMS.
D. GLOBAL CUSTODY
* The following basis point fees are based on all global assets for The
International Growth Portfolio, The Global Strategic Income Portfolio
and the Global Resources Portfolio. The following basis point fees and
transaction charges vary by country according to the enclosed Band
groupings.
COUNTRY ANNUAL FEE PER TRADE
------- ---------- ---------
Band II 4 Basis Points 20
Band III 10 Basis Points 50
Band IV 12 Basis Points 120
Band V 15 Basis Points 50
Band VI 20 Basis Points 50
Band VII 22 Basis Points 100
COUNTRY ANNUAL FEE PER TRADE
------- ---------- ---------
Band VIII 27 Basis Points 110
Band IX 30 Basis Points 120
Band X 42 Basis Points 150
E. OUT OF POCKET EXPENSES
* These charges consist of:
-Pricing & Verification Services -Forms & Supplies
-Telephone -Support Equipment Rental
-Micro Rental -Third Party Audit
-Legal Fees for substantial changes to -Ad hoc reports
the Custody Contract will be paid by
Palladian Advisors
F. BALANCE CREDITS
We allow balance credit against fees (excluding out-of-pocket
charges) for collected fund balances arising out of the custody
relationships. The monthly earnings allowance is equal to 75% of the
90-day T-xxxx rate.
G. SECURITIES LENDING & FOREIGN EXCHANGE CONTRACTS
This fee schedule was developed with the assumption that Investors Bank
would do Securities Lending and foreign exchange contracts for
Palladian Advisors.
