Exhibit 7
CUSTODIAN AGREEMENT
between
INVESTORS BANK & TRUST COMPANY
and
ALLMERICA INVESTMENT TRUST
CUSTODIAN AGREEMENT
AGREEMENT made as of this 1st day of April, 1999, between ALLMERICA
INVESTMENT TRUST, a Massachusetts business trust (the "Fund"), and INVESTORS
BANK & TRUST COMPANY, a Massachusetts trust company (the "Bank").
The Fund, an open-end management investment company on behalf of the
portfolios/series listed on Appendix A hereto (as such Appendix A may be amended
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from time to time) (each a "Portfolio" and collectively, the "Portfolios"),
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
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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. For the services rendered pursuant to this
Agreement the Fund agrees to pay to the Bank the fees set forth on Appendix B
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hereto.
2. Definitions. Whenever used herein, the terms listed below will have
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the following meaning:
2.1 Authorized Person. Authorized Person will mean any of the persons
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duly authorized to give Proper Instructions or otherwise act on behalf of the
Fund by appropriate resolution of its Board, and set forth in a certificate as
required by Section 4 hereof.
2.2 Board. Board will mean the Board of Directors or the Board of
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Trustees of the Fund, as the case may be.
2.3 Security. The term security as used herein will have the same
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meaning assigned to such term 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.
2.4 Portfolio Security. Portfolio Security will mean any Security owned
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by the Fund.
2.5 Officers' Certificate. Officers' Certificate will mean, unless
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otherwise indicated, any request, direction, instruction, or certification in
writing signed by any two Authorized Persons of the Fund.
2.6 Book-Entry System. Book-Entry System shall mean the Federal Reserve-
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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.
2.7 Depository. Depository shall mean The Depository Trust Company
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("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.
2.8 Proper Instructions. Proper Instructions shall mean (i) instructions
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regarding the purchase or sale of Portfolio Securities, and payments and
deliveries in connection therewith, given by an Authorized Person, 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 an Authorized
Person. Oral instructions will be considered Proper Instructions if the Bank
reasonably believes them to have been given by an Authorized Person. 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 shall use reasonable efforts to detect any discrepancy
between the original instruction and such confirmation and to report such
discrepancy promptly 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 Proper Instructions as to the action
required. Upon receipt by the Bank 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 agree in writing that such procedures afford adequate
safeguards for the Fund's assets.
3. Separate Accounts. The Bank will segregate the assets of each Portfolio
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to which this Agreement relates into a separate account for each such Portfolio
containing the assets of such 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 Portfolios, any reference in this Agreement to any
assets of the Fund, including, without limitation, any portfolio securities and
cash and earnings thereon, shall be deemed to refer only to assets of the
applicable Portfolio, any duty or obligation of the Bank hereunder to the Fund
shall be deemed to refer to duties and obligations with respect to such
individual Portfolio and any obligation or liability of the Fund hereunder shall
be binding only with respect to such individual Portfolio, and shall be
discharged only out of the assets of such Portfolio.
4. Certification as to Authorized Persons. The Secretary or Assistant
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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
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Officers' Certificate given to it by the Fund which has been signed by
Authorized Persons named in the most recent certification received by the Bank.
5. Custody of Cash. As custodian for the Fund, the Bank will open and
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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 Sections 14.2 or 14.3 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. Pursuant to the Bank's internal
policies regarding the management of cash accounts and in order to allow the
Bank to comply with applicable Federal Deposit Insurance Corporation and Federal
Reserve Board regulations, the Bank may segregate certain portions of the cash
of the Fund into a separate savings deposit account upon which the Bank reserves
the right to require seven (7) days notice prior to withdrawal of cash from such
an account. The Fund may at any time instruct the Bank to cease such
segregation of the Fund's cash. 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
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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 (as
that term is defined in Section 6.6 hereof)) 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
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or redemption of common shares of the Fund offered for repurchase or redemption
in accordance with Section 7 of this Agreement.
5.3 Distributions and Expenses of Fund. For the payment on the account
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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
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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,
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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;
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5.6 Repayment of Cash. To repay the cash delivered to the Fund for the
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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.
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(a) For payments in connection with foreign exchange contracts or
options to purchase and sell foreign currencies for spot and future delivery
(collectively, "Foreign Exchange Agreements") 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. 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.
(b) In order to secure any payments in connection with Foreign
Exchange Agreements which may be entered into by the Bank pursuant to Proper
Instructions, the Fund agrees that the Bank shall have a continuing lien and
security interest, to the extent of any payment due under any Foreign Exchange
Agreement, in and to any property at any time held by the Bank 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 the Bank's sole
discretion, at any time to charge any such payment due under any Foreign
Exchange Agreement against any balance of account standing to the credit of the
Fund on the Bank's books, provided that if the obligations secured pursuant to
this section can be allocated to a specific Portfolio, such security interest
will be limited to the property held for that Portfolio only.
5.8 Other Authorized Payments. For other authorized transactions of
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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
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hereinafter set forth pursuant to Section 8 and Section 16 of this Agreement.
6. Securities.
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6.1 Segregation and Registration. Except as otherwise provided
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herein, and except for securities to be delivered to any subcustodian appointed
pursuant to Sections 14.2 or 14.3 hereof, the Bank as custodian will receive and
hold pursuant to the provisions hereof, in 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
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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
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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 or, if so instructed
by the Fund, to the investment advisor, all notices, proxies and proxy
soliciting materials delivered to the Bank 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 Corporate Action. If at any time the Bank is notified that an
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issuer of any Portfolio Security has taken or intends to take a corporate action
(a "Corporate Action") that affects the rights, privileges, powers, preferences,
qualifications or ownership of a Portfolio Security, including without
limitation, liquidation, consolidation, merger, recapitalization,
reorganization, reclassification, subdivision, combination, stock split or stock
dividend, which Corporate Action requires an affirmative response or action on
the part of the holder of such Portfolio Security (a "Response"), the Bank shall
notify the Fund or, if so instructed by the Fund, the investment advisor,
promptly of the Corporate Action, the Response required in connection with the
Corporate Action and the Bank's deadline for receipt from the Fund of Proper
Instructions regarding the Response (the "Response Deadline"). The Bank shall
use commercially reasonable efforts to monitor Corporate Action activity related
to Portfolio Securities. The Bank also shall employ systems to track the
statues of required Responses and the corresponding Corporate Action expiration
dates at the applicable depository. The Bank shall forward to the Fund via
telecopier and/or overnight courier all notices, information statements or other
materials relating to the Corporate Action promptly after receipt of such
materials by the Bank.
(a) The Bank shall act upon a required Response only after
receipt by the Bank of Proper Instructions from the Fund no later than 5:00 p.m.
on the date specified as the Response Deadline and only if the Bank (or its
agent or subcustodian hereunder) has actual possession of all necessary
Securities, consents and other materials no later than 5:00 p.m. on the date
specified as the Response Deadline.
(b) The Bank shall have no duty to act upon a required Response
if Proper Instructions relating to such Response and all necessary Securities,
consents and other materials are not received by and in the possession of the
Bank by 5:00 p.m. on the date specified as the Response Deadline.
Notwithstanding, the Bank shall use its best efforts to act upon a Response for
which Proper Instructions and/or necessary Securities, consents or other
materials are received by the Bank after 5:00 p.m. on the date specified as the
Response Deadline, it being acknowledged and agreed by the parties that while
any undertaking by the Bank to use its best efforts in such circumstances shall
not create a duty upon the Bank to complete such Response prior to its
expiration, the Bank nevertheless shall use its best efforts to do so.
(c) In the event that the Fund notifies the Bank of a Corporate
Action requiring a Response and the Bank has received no other notice of such
Corporate Action, the Response Deadline shall be one business day prior to the
Response expiration time set by the depository processing such Corporate Action
provided that the Fund has the information necessary to direct such Response.
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(d) Section 14.3(g) of this Agreement shall govern any Corporate
Action involving Foreign Portfolio Securities held by a Selected Foreign Sub-
Custodian.
6.4 Book-Entry System. Provided (i) the Bank has received a certified
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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 the 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 a
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 securities purchased for
the account of the Fund or shall pay cash collateral against the return of
Portfolio Securities loaned by the Fund upon (i) receipt of advice from the
Book-Entry System that such 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 or securities
collateral against the delivery of 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 of 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;
6.5 Use of a Depository. Provided (i) the Bank has received a
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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
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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 and held for the account of the
Bank for its customers;
(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 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 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 use its best efforts and reasonable care to
provide 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) 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 promptly 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 the Rules thereunder; and
(v) Such Depository delivers to the Bank 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 and the Bank
shall, upon request by the Fund, forward such reports to the Fund.
6.6 Use of Book-Entry System for Commercial Paper. Provided the Bank
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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"), 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
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the Fund, commercial paper issued by issuers with whom the Bank has entered into
a book-entry agreement (the "Issuers"). In maintaining procedures for Book-Entry
Paper, 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 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; and
(e) The Bank will send to the Fund such reports on its system of
internal accounting control with respect to the Book-Entry Paper as the Fund may
reasonably request from time to time.
6.7 Use of Immobilization Programs. Provided (i) the Bank has received
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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.
6.8 Eurodollar CDs. Any Portfolio Securities which are Eurodollar CDs
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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 Portfolio 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 Portfolio Securities. Notwithstanding any other provision of this Agreement
to the contrary, except as stated in the first sentence of this subsection 6.8
and provided it acts without negligence, bad faith and willful misconduct, the
Bank shall be under no other duty with respect to such Eurodollar CDs belonging
to the Fund.
6.9 Options and Futures Transactions.
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(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or Over-
the-Counter.
(i) 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 among the Bank, any
broker-dealer registered with 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
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Corporation and of any registered national securities exchange, or of any
similar organization or organizations.
(ii) 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 6.10 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 or 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 responsibility of the Fund.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
(i) 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 entered into upon the receipt of Proper Instructions
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.
(ii) The responsibilities 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)(ii)
of this Section 6.9 as if such subparagraph referred to Futures Commission
Merchants rather than brokers, and Futures and puts and calls thereon instead of
options.
6.10 Segregated Account. The Bank shall upon receipt of Proper
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Instructions establish and maintain a Segregated Account or Accounts for and on
behalf of the Fund.
(a) Cash and/or Portfolio Securities may be transferred into a
Segregated Account upon receipt of Proper Instructions in the following
circumstances:
(i) 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;
(ii) 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;
(iii) 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
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Securities and all the Fund's then outstanding commitments under reverse
repurchase agreements entered into with broker-dealer firms;
(iv) 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;
(v) for other proper corporate purposes, but only, in the case of
this clause (v), upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board, or of the executive committee of
the Board 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.
(b) Cash and/or Portfolio Securities may be withdrawn from a
Segregated Account pursuant to Proper Instructions in the following
circumstances:
(i) with respect to assets deposited in accordance with the
provisions of any agreements referenced in (a)(i) or (a)(ii) above, in
accordance with the provisions of such agreements;
(ii) with respect to assets deposited pursuant to (a)(iii) or
(a)(iv) above, for sale or delivery to meet the Fund's obligations under
outstanding forward commitment or when-issued agreements for the purchase of
Portfolio Securities and under reverse repurchase agreements;
(iii) for exchange for other liquid assets of equal or greater
value deposited in the Segregated Account;
(iv) 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;
(v) for delivery upon settlement of a forward commitment or when-
issued agreement for the sale of Portfolio Securities; or
(vi) with respect to assets deposited pursuant to (a)(v) above, in
accordance with the purposes of such account as set forth in Proper
Instructions.
6.11 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.
10
6.12 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 any transfer, exchange, delivery
or release under this Section shall be made only in accordance with Proper
Instructions. The Proper Instructions shall state that such transfer, exchange
or delivery is for a purpose permitted under the terms of this Section 6.12, and
shall specify the applicable subsection, or describe the purpose of the
transaction with sufficient particularity to permit the Bank to ascertain the
applicable subsection. After receipt of such Proper Instructions, the Bank will
transfer, exchange, deliver or release Portfolio Securities only in the
following circumstances:
(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 received by the Bank before such payment is made,
as confirmed in the Proper Instructions received by the Bank before such payment
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 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, absent its own negligence, bad faith and willful
misconduct, 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, provided further, however, 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, Portfolio Securities may be released for that
purpose without any such payment. In the event that any 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 and any loan agreement between the fund and 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;
11
(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 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 16 of this Agreement.
As to any deliveries made by the Bank pursuant to this Section 6.12,
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 of Incorporation or Declaration of Trust and By-
laws of the Fund (the "Articles"), 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, 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 through
the end of the then current term of this Agreement, disbursements and expenses
of the Bank and satisfactory completion of any other duties and obligations of
the Bank hereunder, this Agreement will terminate and the Bank shall be released
from any and all obligations hereunder.
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, the Bank will take the following actions without
prior authorization or instruction of the Fund or the transfer agent, if any:
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
12
by it for the account of the Fund and hold for the account of the Fund all
income, dividends, interest and other payments or distributions 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.
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 reasonable efforts to
------------------------
collect promptly any funds which may to its knowledge become collectible arising
from Portfolio Securities, including dividends, interest and other income, and
to transmit promptly 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.
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. 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 perform fund accounting and 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.
13
The books and records maintained by the Bank on behalf of the Fund are the
property of the Fund and will be surrendered to the Fund upon request.
12. Fund Evaluation and Yield Calculation
-------------------------------------
12.1 Fund Evaluation. The Bank shall compute and, unless otherwise
---------------
directed by the Board, determine as of the close of regular trading on the New
York Stock Exchange on each day on which said Exchange is open for unrestricted
trading and as of such other days, or 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 the 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 or procedures
adopted by 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, absent any negligence,
bad faith and willful misconduct by the Bank, for any good faith reliance on
any quotations received from a source pursuant to (iii) above.
12.2. Yield Calculation. The Bank will compute the performance results
------------------
of the Fund (the "Yield Calculation") in accordance with the provisions of
Release No. 33-6753 and Release No. IC-16245 (February 2, 1988) (the "Releases")
promulgated by the Securities and Exchange Commission, and any subsequent
amendments to, published interpretations of or general conventions accepted by
the staff of the Securities and Exchange Commission with respect to such
releases or the subject matter thereof ("Subsequent Staff Positions"), subject
to the terms set forth below:
(a) The Bank shall compute the Yield Calculation for the Fund for
the stated periods of time as shall be mutually agreed upon, and communicate in
a timely manner the result of such computation to the Fund.
(b) In performing the Yield Calculation, the Bank will derive the
items of data necessary for the computation from the records it generates and
maintains for the Fund pursuant Section 11 hereof. The Bank shall have no
responsibility to review, confirm, or otherwise assume any duty or liability
with respect to the accuracy or correctness of any such data supplied to it by
the Fund, any of the Fund's designated agents or any of the Fund's designated
third party providers, provided, however, the Bank shall promptly notify the
Fund if the Bank becomes aware that such data is, or may be, inaccurate or
incorrect.
(c) At the request of the Bank, the Fund shall provide, and the
Bank shall be entitled to rely on, written standards and guidelines to be
followed by the Bank in interpreting and applying the computation methods set
forth in the Releases or any Subsequent Staff Positions as they specifically
apply to the Fund. In the event that the computation methods in the Releases or
the Subsequent Staff Positions or the application to the Fund of a standard or
guideline is not free from doubt or in the event
14
there is any question of interpretation as to the characterization of a
particular security or any aspect of a security or a payment with respect
thereto (e.g., original issue discount, participating debt security, income or
return of capital) or otherwise or as to any other element of the computation
which is pertinent to the Fund, the Fund or its designated agent shall have the
responsibility for making the determination of how the security or payment is to
be treated for purposes of the computation and how the computation is to be made
and shall inform the Bank thereof on a timely basis. The Bank shall have no
responsibility to make independent determinations with respect to any item which
is covered by this Section, and shall not be responsible for its computations
made in accordance with such determinations absent negligence, bad faith and
willful misconduct by the Bank in the performance of such computations.
(d) The Fund shall keep the Bank informed of information and non-
public advice, or information obtained by the Fund from its independent auditors
or by its personnel or the personnel of its investment adviser, or Subsequent
Staff Positions related to the computations to be undertaken by the Bank
pursuant to this Agreement and the Bank shall not be deemed to have knowledge of
such non-public information (except as contained in the Releases) unless it has
been furnished to the Bank in writing.
13. Additional Services. The Bank shall perform the additional services
-------------------
for the Fund as are set forth on Appendix C hereto. Appendix C may be amended
---------- ----------
from time to time upon agreement of the parties to include further additional
services to be provided by the Bank to the Fund, at which time the fees set
forth in Appendix B shall be appropriately increased.
----------
14. Duties of the Bank.
------------------
14.1 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.
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;
(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) absent negligence, bad faith and willful misconduct by the
Bank, 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.
15
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.
14.2 Agents and Subcustodians with Respect to Property of the Fund Held
------------------------------------------------------------------
in the United States. The Bank may employ agents of its own selection 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. Without
limiting the foregoing, certain duties of the Bank hereunder may be performed by
one or more affiliates of the Bank.
Upon receipt of Proper Instructions, the Bank may employ subcustodians
selected by or at the direction of the Fund, 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 any subcustodian
selected by or at the direction of the Fund 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 any 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 any subcustodian as provided in the fee schedule
attached as Appendix B hereto.
----------
14.3 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, 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 the use of Euro-
clear 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
16
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 provided 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 reregistration of securities); (c) adequate records will be
maintained identifying the assets as belonging to the 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 and advice of any transfers of
assets into or out of the accounts of such Selected Foreign Sub-Custodians.
(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.
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
17
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, absent its
own negligence, bad faith and willful misconduct, the Bank shall have no further
duty or obligation with respect to such Rights, including, without 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 the Fund from and against 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 Bank shall grant the Fund a
right of subrogation with regard to the rights of the Bank as they affect the
Fund under any 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) 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 its partners or the Bank as the custodian of the Fund by the tax law of
any non-U.S. jurisdiction, including responsibility for withholding and other
taxes, assessments or other governmental charges, certifications and
governmental reporting. The Selected Foreign Sub-custodian and the Bank shall
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.
14.4 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 and shall maintain such insurance
coverage as the Bank believes is prudent and adequate.
14.5. Fees and Expenses of the 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). 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 reasonable expenses incurred in conjunction with termination of
this Agreement.
14.6 Advances by the 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
18
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. Such overdraft shall bear 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 or to
the extent required by law, whichever is greater, 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 the Bank's 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 appropriate Portfolio of the Fund on the Bank's
books.
15. Limitation of Liability.
-----------------------
15.1 The Bank shall exercise reasonable care and shall act without
negligence, bad faith or willful misconduct in the performance of its duties and
obligations hereunder. Notwithstanding anything in this Agreement to the
contrary, in no event shall the Bank or any of its officers, directors or
employees (collectively, the "Indemnified Parties") be liable to the Fund or any
third party, and the Fund shall indemnify and hold the Bank and the Indemnified
Parties harmless from and against any and all loss, damage, liability, actions,
suits, claims, costs and expenses, including legal fees, (a "Claim") arising as
a result of any act or omission of the Bank or any Indemnified Party under this
Agreement, except to the extent that any Claim results from the negligence,
willful misfeasance, willful misconduct or bad faith of the Bank or any
Indemnified Party. Without limiting the foregoing, neither the Bank nor the
Indemnified Parties shall be liable for, and the Bank and the Indemnified
Parties shall be indemnified against, any Claim arising as a result of:
(a) Any act or omission by the Bank or any Indemnified Party in
good faith reliance upon the terms of this Agreement, any Officer's Certificate,
Proper Instructions, resolution of the Board, telegram, telecopier, notice,
request, certificate or other instrument reasonably believed by the Bank to
genuine;
(b) Any act or omission of any subcustodian selected by or at the
direction of the Fund;
(c) Any act or omission of a Selected Foreign Sub-Custodian to the
extent which such Selected Foreign Sub-Custodian is not liable to the Bank
because such Selected Foreign Sub-Custodian acted in accordance the standards
applicable to custodians in the relevant market;
(d) Any Corporate Action, distribution or other event related to
Portfolio Securities which, at the direction of the Fund, have not been
registered in the name of the Bank or its nominee;
(e) Any Corporate Action requiring a Response for which the Bank
has not received Proper Instructions or obtained actual possession of all
necessary Securities, consents or other materials by 5:00 p.m. on the date
specified as the Response Deadline;
(f) Any act or omission of any European Branch of a U.S. banking
institution that is the issuer of Eurodollar CDs in connection with any
Eurodollar CDs held by such European Branch;
19
(g) Information relied on in good faith by the Bank and supplied
by any Authorized Person in connection with the calculation of (i) the net asset
value and public offering price of the shares of capital stock of the Fund or
(ii) the Yield Calculation; or
(h) 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 beyond the reasonable control of the Bank. Notwithstanding
the foregoing, the Bank has and shall maintain appropriate back-up and disaster
recovery facilities and shall use it best efforts to provide all required
information and services hereunder to the Fund as soon as possible after any
such delay in performance.
15.2 Notwithstanding anything to the contrary in this Agreement, in no
event shall the Bank or the Indemnified Parties be liable to the Fund or any
third party for any special, consequential or punitive damages hereunder.
16. Termination.
-----------
16.1 The term of this Agreement shall be three years commencing upon the
date hereof (the "Initial Term"), unless earlier terminated as provided herein.
After the expiration of the Initial Term, the term of this Agreement shall
automatically renew for successive one-year terms (each a "Renewal Term") unless
notice of non-renewal is delivered by the non-renewing party to the other party
no later than ninety days prior to the expiration of the Initial Term or any
Renewal Term, as the case may be.
(a) Either party hereto may terminate this Agreement prior to the
expiration of the Initial Term or any Renewal Term in the event the other party
violates any material provision of this Agreement, provided that the non-
violating party gives written notice of such violation to the violating party
and the violating party does not cure such violation within 90 days of receipt
of such notice.
(b) If a majority of the Board reasonably determines that the
performance of the Bank under this Agreement has been unsatisfactory, written
notice (the "Notice") of such determination setting forth the reasons for such
determination shall be provided to the Bank. Such determination shall be based
upon such information as the Board in its sole discretion elects to consider,
including the Bank's performance against the "Performance Goals" (as defined
below). In order to be effective, any Notice must be executed by two officers of
the Fund. The Bank shall, within sixty (60) days after receipt of the Notice,
either (i) correct the deficiencies listed in the Notice; or (ii) renegotiate
terms of this Agreement in a form satisfactory to the Fund. If the conditions of
the preceding sentence are not met within such sixty (60) day period, the Fund
may terminate this Agreement without additional action by the Fund's Board upon
an additional sixty (60) days written notice. For the purposes of this Section,
"Performance Goals" shall mean the performance goal criteria mutually agreed
between the parties. The parties agree to develop the initial Performance Goals
no later than June 30, 1999 and agree to periodically review the Performance
Goals for necessary updates due to changes in the nature or scope of services
provided hereunder.
16.2 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
20
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 16.3,
deliver the Portfolio Securities and cash of the Fund held by the Bank to a bank
or trust company of the Bank's 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. Thereafter, upon satisfactory completion of all
its duties and obligations hereunder, the Bank shall be released from any and
all obligations under this Agreement.
16.3 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. Thereafter,
upon satisfactory completion of all its duties and obligations hereunder, the
Bank shall be released from any and all obligations under this Agreement.
16.4 The Fund shall reimburse the Bank for any reasonable out-of-pocket
expenses incurred by the Bank in connection with the termination of this
Agreement, such as fees for the transfer of the Funds' assets and records to a
successor custodian and fees for any special processing in connection with such
transfer. The Fund shall not be liable for severance payments, retention
bonuses or termination bonuses to the Bank or its employees in connection with
the termination of this Agreement.
16.5 At any time after the termination of this Agreement, the Fund may,
upon written request, have reasonable access to the records of the Bank relating
to its performance of its duties as custodian.
17. Confidentiality. Both parties hereto agree than any non-public
---------------
information obtained hereunder concerning the other party is confidential and
may not be disclosed without the written consent of the other party, except as
may be required by applicable law or at the request of a governmental agency
having proper jurisdiction. 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, in addition to all other remedies at law or in equity
to an injunction or injunctions without bond or other security to prevent
breaches of this provision.
18. 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 delivered via (I) United
States Postal Service registered mail, (ii) telecopier with written
confirmation, (iii) hand delivery with signature to such party at its office at
the address set forth below, namely:
(a) In the case of notices sent to the Fund to:
Allmerica Investment Trust
000 Xxxxxxx Xxxxxx
00
Xxxxxxxxx, XX 00000
Attn: President
With a copy to: Counsel
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
000 Xxxxxxxxx Xxxxxx, X.X. Xxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxxxx X'Xxxxxxx, Director - Client Management
With a copy to: Xxxx X. Xxxxx, General Counsel
or at such other place as such party may from time to time designate
in writing.
19. Amendments. This Agreement may not be altered or amended, except by
----------
an instrument in writing, executed by both parties.
20. 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 16 hereof will not be deemed to
be an assignment within the meaning of this provision.
21. Governing Law. This Agreement and all performance hereunder will be
-------------
governed by the laws of the Commonwealth of Massachusetts, without regard to
conflict of laws provisions.
22. 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.
23. Entire Agreement. This Agreement, together with its Appendices,
----------------
constitutes the sole and entire agreement between the parties relating to the
subject matter herein and does not operate as an acceptance of any conflicting
terms or provisions of any other instrument and terminates and supersedes any
and all prior agreements and undertakings between the parties relating to the
subject matter herein.
24. 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 is executed by or
on behalf of the Fund by the Trustees as Trustees or by the officers as officers
and not individually, and that the obligations of this Agreement are not binding
upon any of the Trustees, officers or shareholders of the Fund, but are binding
only upon the assets and property of the Fund. The parties hereto agree that no
shareholder, Trustee or officer of the Fund may be held personally liable or
responsible for any obligation of the Fund arising out of this Agreement.
25. Several Obligations of the Portfolios. This Agreement is an agreement
-------------------------------------
entered into between the Bank and the Fund with respect to each Portfolio. With
respect to any obligation of the Fund on behalf of any Portfolio arising out of
this Agreement, the Bank shall look for payment or satisfaction of such
obligation solely to the assets of the Portfolio to which such obligation
relates as though the Bank had separately contracted with the Fund by separate
written instrument with respect to each Portfolio.
22
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.
ALLMERICA INVESTMENT TRUST
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------
Title: President
INVESTORS BANK & TRUST COMPANY
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------
Title: Executive Vice President
23
Appendices
----------
Appendix A.......................................... Portfolios
Appendix B.......................................... Fee Schedule
Appendix C.......................................... Additional Services
24
Appendix A
----------
Portfolios
. Select Emerging Markets Fund
. Select Aggressive Growth Fund
. Select Capital Appreciation Fund
. Select Value Opportunity Fund
. Select International Equity Fund
. Select Growth Fund
. Select Strategic Growth Fund
. Growth Fund
. Equity Index Fund
. Select Growth and Income Fund
. Select Income Fund
. Investment Grade Income Fund
. Government Bond Fund
. Money Market Fund
Appendix B
----------
Allmerica Investment Trust
Fee Schedule
================================================================================
CUSTODY, FUND ACCOUNTING, CALCULATION OF N.A.V. and
FUND ADMINISTRATION
================================================================================
A. Domestic Custody, Fund Accounting, Calculation of N.A.V. and Fund
------------------------------------------------------------------
Administration
--------------
The following fees will apply to all assets for which Investors Bank
provides custody, fund accounting, calculation of N.A.V. and fund
administration. This fee does not include transactions or global custody
costs.
Annual Fee
----------
First $2 Billion of Net Assets 3.5 Basis Points
Next $2Billion of Net Assets 2.5 Basis Points
Assets in excess of $4 Billion 2.0 Basis Points
The yearly minimum fee for each fund is $75,000. Future funds in addition
to the 14 funds are subject to a $75,000 minimum fee.
B. Transactions
------------
. DTC/Fed Book Entry $ 8**
. Physical Securities 35
. Options and Futures 18
. GNMA Securities 30
. Principal Paydown 5
. Foreign Currency 18***
. Outgoing Wires 7
. Incoming Wires 5
** Assumes trade information is sent electronically to Investors Bank in the
ISITC/SWIFT format. Manual trades will be billed at $12.00 per trade. There
are no transaction charges for use of the Investors Bank Repo.
*** There are no transaction charges for F/X contracts executed by Investors
Bank.
C. Foreign Subcustodian Fees
-------------------------
. Incremental basis point and transaction fees will be charged for all
foreign assets for which we are custodian. The asset based fees and
transaction fees vary by country, based upon the attached global custody
fee schedule. Local duties, script fees, registration, exchange fees, and
other market charges are out-of-pocket.
2
. Investors Bank will require the fund to hold all international assets at
the subcustodian of our choice.
================================================================================
MISCELLANEOUS
================================================================================
A. Out-of-Pocket
-------------
. These charges consist of:
-Legal Expenses -Non Standard Extracts
-Printing, Delivery & Postage -Data Transmissions
-Third Party Review -Forms & Supplies
-Extraordinary Travel Expenses -Micro Rental
-Customized Systems -InvestView
Development/Reports
-Pricing and Verification services
-Telecommunications
-Financial Statement
Printing/Edgarization
-Support Equipment Rental
B. Domestic Balance Credit
-----------------------
. We allow use of balance credit against fees (excluding out-of-pocket
charges) for fund balances arising out of the custody relationship. The
credit is based on collected balances reduced by balances required to
support the activity charges of the accounts. The monthly earnings
allowance is equal to 75% of the 90-day T-xxxx rate.
C. Foreign Exchange, Cash Management and Securities Lending
--------------------------------------------------------
. This Fee Schedule assumes Investors Bank will perform foreign exchange,
cash management and security lending services for the portfolios.
Securities lending revenue is split with the portfolios and Investors
Bank on a 60/40% basis: 60% going to the portfolio. Securities lending
revenue to AIT is estimated to be $750,000 per year based on current
portfolios.
D. Payment
-------
. The above fees will be charged against the fund's custodian checking
account five business days after the invoice is mailed.
E. Systems
-------
. The details of any systems work will be determined after a thorough
business analysis. System's work will be billed on a time and material
basis. Investors Bank provides an allowance of 10 systems hours for data
extract set up and reporting extract set up. Additional hours will be
billed on a time and material basis.
3
F. Term
----
. The term of this Fee Schedule shall be three years commencing upon the
date of conversion of the Company's assets to the Bank (the "Initial
term").
* This fee schedule is valid for 90 days from the date of issue.
* This fee schedule is contingent on Investors Bank providing custody and
related services for the Allmerica Separate Accounts, Allmerica Securities
Trust and The Fulcrum Trust.
* This fee schedule is confidential between Investors Bank and the Allmerica
Investment Trust and shall not be disclosed to any third party without the
written consent of both parties.
4
Appendix C
----------
Additional Services
None.
5
