CUSTODY AGREEMENT
-----------------
THIS AGREEMENT is made as of the 19th day of October, 1998 by
and between The Bank of New York, a New York corporation authorized to do a
banking business ("Custodian"), and Nations Fund, Inc., a Maryland corporation
(the "Company").
W I T N E S S E T H
-------------------
WHEREAS, the Company is a registered open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Company desires to retain Custodian to serve as
custodian for the Company, on behalf of its portfolios listed on Schedule I
(individually a "Fund" and collectively the "Funds") and to provide the services
described herein, and Custodian is willing to serve and to provide such
services; and
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the Company and Custodian hereby agree as follows:
1. Appointment. The Company hereby appoints Custodian to act as
custodian of its portfolio securities, cash and other property on the terms set
forth in this Agreement. Custodian accepts such appointment and agrees to
furnish the services herein set forth in return for the compensation as provided
in Paragraph 23 hereof. Custodian agrees to comply with all relevant provisions
of the 1940 Act and applicable rules and regulations thereunder.
The Company may from time to time issue separate series or classes, and
classify and reclassify shares of any such series or class. The Company shall
promptly specify to Custodian in writing such series or classes, or any
reclassification and thereafter Custodian shall identify to each such series or
class Property, as hereinafter defined, belonging to such series or class, and
such reports, confirmations and notices to the Company as are called for under
this Agreement shall identify the series or class to which such report,
confirmation or notice pertains.
2. Delivery of Documents. The Company has furnished Custodian with
copies properly certified or authenticated of each of the following:
(a) resolutions of the Company's Board of Directors
authorizing the appointment of Custodian as custodian of portfolio securities,
cash and other property of the Company, respectively, and approving and
consenting to this Agreement;
(b) schedules identifying and containing the signatures of all
of the Company's officers and any other persons authorized to issue Oral
Instructions and to sign Written Instructions, as hereinafter defined, on behalf
of the Funds of the Company;
(c) the Company's current Registration Statement on Form N-1A
under the 1940 Act and the Securities Act of 1933, as amended (the "1933 Act"),
as filed with the Securities and Exchange Commission (the "SEC"), relating to
shares of beneficial interest of the Company, without par value (the "Shares");
1
(d) the current prospectuses and statement of additional
information of each of the Funds, including all amendments and supplements
thereto (the "Prospectuses"); and
(e) a copy of the opinion of counsel for the Company, filed
with the SEC as part of the Company's current registration statement.
The Company will furnish Custodian from time to time with
copies, properly certified or authenticated, of all amendments of or supplements
to any of the foregoing, if any.
3. Definitions.
-----------
(a) "Authorized Person". As used in this Agreement, the term
"Authorized Person" means any of the Company's officers, and any other person,
whether or not any such person is an officer or employee of the Company, duly
authorized by the Board of Directors of the Company to give Oral and Written
Instructions to Custodian on behalf of the Company and listed on a schedule
provided to Custodian pursuant to Section 2 of this Agreement. Authorized
Persons duly authorized by the Board of Directors of the Company to buy and sell
foreign currency on a spot and forward basis and options to buy and sell foreign
currency are denoted by an asterisk thereon.
(b) "Book-Entry System". As used in this Agreement, the term
"Book-Entry System" means the Federal Reserve/Treasury book-entry system for
United States and federal agency securities, its successor or successors and its
nominee or nominees and any book-entry system maintained by a clearing agency
registered with the SEC under Section 17A of the Securities Exchange Act of 1934
(the "1934 Act").
(c) "Composite Currency Unit". Shall mean the European
Currency Unit or any other composite unit consisting of the aggregate of
specified amounts of specified Currencies as such unit may be constituted from
time to time.
(d) "Currency". Shall mean money denominated in a lawful
currency of any country or the European Currency Unit.
(e) "FX Transaction". Shall mean any transaction for the
purchase by one party of an agreed amount in one Currency against the sale by it
to the other party of an agreed amount in another Currency.
(f) "Instructions". Shall mean instruction communications
transmitted by appropriately safeguarded (whether by password protection or
other means) electronic or telecommunications media including but not limited to
S.W.I.F.T., LASER, computer-to-computer interface, dedicated transmission line
and tested telex.
(g) "Oral Instructions". As used in this Agreement, the term
"Oral Instructions" means oral instructions actually received by Custodian from
an Authorized Person or from a person reasonably believed by Custodian to be an
Authorized Person.
(h) "Officer's Certificate". The term "Officer's Certificate"
as used in this Agreement means instructions delivered by hand, mail, tested
telegram, cable, telex, or facsimile
2
sending device, and actually received by Custodian signed or reasonably believed
by Custodian to be signed by two officers of the Company listed on a schedule
provided to Custodian pursuant to Section 2 of this Agreement.
(i) "Property". The term "Property", as used in this
Agreement, means:
(i) any and all securities and other property of the
Company which the Company may from time to time deliver to Custodian, as
applicable, or which Custodian may from time to time hold for the Company;
(ii) all income in respect of any securities or other
property described in immediately preceding clause (i);
(iii) all proceeds of sales of any of such securities or
other property described in preceding clause (i) actually received by Custodian;
and
(iv) proceeds of the sale of Shares received by Custodian
from time to time from or on behalf of the Company.
(j) "Securities Depository". As used in this Agreement, the
term "Securities Depository" shall mean The Depository Trust Company, a clearing
agency registered with the SEC or its successor or successors and its nominee or
nominees; and shall also mean any other registered clearing agency, its
successor or successors specifically identified in a certified copy of a
resolution of the Company's Board of Directors approving deposits by Custodian
therein.
(k) "Written Instructions". As used in this Agreement,
"Written Instructions" means instructions delivered by hand, mail, tested
telegram, cable, telex, or facsimile sending device, and actually received by
Custodian, signed or reasonably believed by Custodian to be signed by an
appropriate number of Authorized Person(s), and the term Written Instructions
shall also include Instructions, except that Instructions need not be signed or
reasonably believed to be signed by any Authorized Person(s) where such
Instructions are transmitted by Software pursuant to Paragraph 26A. A fax
receipt or comparable confirmation of transmission of any Written Instructions
shall be deemed evidence of actual receipt by Custodian.
4. Delivery and Registration of the Property. The Company shall deliver
or cause to be delivered to Custodian all securities and all monies owned by the
Funds, including cash received for the issuance of Shares, at any time during
the period of this Agreement, except for securities and monies to be delivered
to any sub-custodian appointed, with approval of the Company, by Custodian
pursuant to Paragraphs 7, 27, or 28(g) hereof. Custodian will not be responsible
for such securities and such monies until actually received by it. All
securities delivered to Custodian or any such sub-custodian (other than in
bearer form) shall be registered in the name of the Fund or in the name of a
nominee of a Fund or in the name of Custodian or any nominee of Custodian (with
or without indication of fiduciary status) or in the name of any sub-custodian
or any nominee of such sub-custodian appointed, with approval of the Company,
pursuant to Paragraphs 7, 27, or 28(g) hereof or shall be properly endorsed and
in form for transfer satisfactory to Custodian.
3
5. Voting and Other Rights. With respect to all securities, however
registered, it is understood that the voting and other rights and powers shall
be exercised by the Company. Custodian's only duty with respect to such rights
shall be to mail to the Company within two (2) business days following receipt
by Custodian any documents received by Custodian as custodian, including notices
of corporate action, proxies, proxy soliciting materials and offering circulars,
with any elections or proxies for securities registered in a nominee name
executed by such nominee. In addition, Custodian shall provide notice of
Custodian's receipt of such documents by electronic means (e.g., posting notice
on LASER), as agreed between the parties. Where warrants, options, tenders or
other securities have fixed expiration dates, the Company understands that in
order for Custodian to act, Custodian must receive the Company's instructions at
its offices in New York, addressed as Custodian may from time to time request,
by no later than noon (New York City time) at least one (1) business day prior
to the last scheduled date to act with respect thereto (or such earlier date or
time as Custodian may reasonably notify the Company). Absent Custodian's timely
receipt of such instructions, such instructions will expire without liability to
Custodian. Custodian shall have no duty to forward to the Company any annual,
quarterly or special reports issued by companies whose securities are held by
Custodian hereunder.
6. Receipt and Disbursement of Money.
---------------------------------
(a) Custodian shall open and maintain a custody account for
each Fund of the Company, subject only to draft or order by Custodian acting
pursuant to the terms of this Agreement, and, subject to Paragraphs 7, 27, or
28(g) hereof, shall hold in such account, subject to the provisions hereof, all
cash received by it from or for the Funds. Custodian shall make payments of cash
to, or for the account of, each Fund from such cash only (i) for the purchase of
securities for the Funds as provided in Paragraph 14 hereof; (ii) upon receipt
of an Officer's Certificate for the payment of dividends or other distributions
on or with respect to Shares, or for the payment of interest, taxes,
administration, distribution or advisory fees or expenses which are to be borne
by the Funds under the terms of this Agreement and, with respect to each Fund,
and under the terms of any investment advisory agreements, administration
agreements or distribution agreements; (iii) upon receipt of Written
Instructions for payments in connection with the conversion, exchange or
surrender of securities owned or subscribed to by the Funds and held by or to be
delivered to Custodian; (iv) to a sub-custodian pursuant to Paragraphs 7, 27, or
28(g) hereof; or (v) for the redemption of Shares; or (vi) upon receipt of an
Officer's Certificate for other corporate purposes.
(b) Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received as Custodian
for the Funds.
7. Receipt of Securities.
---------------------
(a) Except as provided by Paragraphs 7(c), 8, 27, or 28(g)
hereof, and except as otherwise directed by Oral or Written Instructions
described in Paragraph 11 hereof, Custodian shall hold and physically segregate
in a separate account with respect to each Fund, identifiable from those of any
other person, all securities and non-cash property received by it for the Funds.
All such securities and non-cash property are to be held or disposed of by
Custodian for each Fund pursuant to the terms of this Agreement. In the absence
of Written Instructions
4
accompanied by a certified resolution authorizing the specific transaction by
the Company's Board of Directors, and subject to Paragraph 25 hereof, Custodian
shall have no power or authority to withdraw, deliver, assign, hypothecate,
pledge or otherwise dispose of any such securities and investments, except in
accordance with the express terms provided for in this Agreement. In no case may
any director, officer, employee or agent of the Company withdraw any securities.
In connection with its duties under this Paragraph 7(a), Custodian may enter
into sub-custodian agreements with other banks or trust companies for the
receipt of certain securities and cash to be held by Custodian for the account
of a Fund pursuant to this Agreement, provided Custodian obtains the prior
written approval of the Company to any such sub-custody arrangement. Custodian
will provide the Company with a copy of each sub-custodian agreement it executes
pursuant to this Paragraph 7(a). Custodian shall be liable for acts or omissions
of any such sub-custodian selected by it pursuant to this Paragraph 7(a), under
the standards of care provided for herein, except for any such sub-custodian
engaged at the specific direction of the Funds. Notwithstanding anything herein
to the contrary, this Paragraph 7(a) shall not apply to Custodian's engagement
of foreign sub-custodians, which shall instead be governed by Paragraph 27
hereof.
(b) Promptly after the close of business on each day,
Custodian shall furnish the Company with confirmations and a summary of all
transfers to or from the account of each Fund during said day. Where securities
are transferred to the account of any Fund established at a Securities
Depository or the Book Entry System pursuant to Paragraph 8 herein, Custodian
shall also, by book-entry or otherwise, identify as belonging to such Fund the
quantity of securities in a fungible bulk of securities registered in the name
of Custodian (or its nominee) or shown in Custodian's account on the books of a
Securities Depository or the Book-Entry System. At least monthly and from time
to time, Custodian shall furnish the Company with a detailed statement of the
Property held for each Fund under this Agreement.
(c) Notwithstanding any provision elsewhere contained herein,
Custodian shall not be required to obtain possession of any instrument or
certificate representing any futures contract, any option, or any futures
contract option until after it shall have determined, or shall have received an
Officer's Certificate from the Company stating that any such instruments or
certificates are available. The Company shall deliver to Custodian such an
Officer's Certificate no later than the business day preceding the availability
of any such instrument or certificate. Prior to such availability, Custodian
shall comply with the 1940 Act in connection with the purchase, sale,
settlement, closing out or writing of futures contracts, options, or futures
contract options by making payments or deliveries specified in such Officer's
Certificates or Written Instructions received by Custodian in connection with
any such purchase, sale, writing, settlement or closing out upon its receipt
from a broker, dealer, or futures commission merchant of a statement or
confirmation reasonably believed by Custodian to be in the form customarily used
by brokers, dealers, or future commission merchants with respect to such futures
contracts, options, or futures contract options, as the case may be, confirming
that the same is held by such broker, dealer or futures commission merchant, in
book-entry form or otherwise, in the name of Custodian (or any nominee of
Custodian) as Custodian for the Fund, provided, however, that notwithstanding
the foregoing, and subject to Paragraph 13(b) hereof, payments to or deliveries
from any margin account, and payments with respect to future contracts, options,
or future contract options to which a margin account relates, shall be made in
accordance with the terms and conditions of the Company's relevant margin
account agreement. Whenever any such
5
instruments or certificates are available, Custodian shall, notwithstanding any
provision in this Agreement to the contrary, make payment for any futures
contract, option, or futures contract option for which such instruments or such
certificates are available against the delivery to Custodian of such instrument
or such certificate, and deliver any futures contract, option or futures
contract option for which such instruments or such certificates are available
only against receipt by Custodian of payment therefor. Any such instrument or
certificate delivered to Custodian shall be held by Custodian hereunder in
accordance with, and subject to, the provisions of this Agreement.
8. Use of Securities Depository or the Book-Entry System. The Company
shall deliver to Custodian a certified resolution of the Board of Directors of
the Company approving, authorizing and instructing Custodian on a continuous and
ongoing basis until instructed to the contrary by Written Instructions (i) to
deposit in a Securities Depository or the Book-Entry System all securities of
the Funds held hereunder eligible for deposit therein and (ii) to utilize a
Securities Depository or the Book-Entry System to the extent possible in
connection with the performance of its duties hereunder, including without
limitation settlements of purchases and sales of securities by the Funds, and
deliveries and returns of securities loaned, subject to repurchase agreements or
used as collateral in connection with borrowings. Without limiting the
generality of such use, the following provisions shall apply thereto:
(a) Securities and any cash of the Funds deposited by
Custodian in a Securities Depository or the Book-Entry System will at all times
be segregated from any assets and cash controlled by Custodian in other than a
fiduciary or custodian capacity. Subject to Paragraph 28(m) hereof, Custodian
and its sub-custodians, if any, will pay out money only upon receipt of
securities and will deliver securities only upon receipt of money, absent
Written Instructions to the contrary.
(b) All books and records maintained by Custodian that relate
to the Funds' participation in a Securities Depository or the Book-Entry System
will at all times during Custodian's regular business hours be open to
inspection by the Company's duly authorized employees or agents and the
Company's independent auditors in accordance with applicable regulations, it
being understood, however, that such records may be kept in an off site
Custodian storage location and the Company will be furnished with all
information in respect of the services rendered to it as it may require.
(c) Custodian will provide the Company with copies of any
report obtained by Custodian on the system of internal accounting control of the
Securities Depository or Book-Entry System promptly after receipt of such a
report by Custodian. Custodian will also provide the Company with such reports
on its own system of internal control as the Company may reasonably request from
time to time.
9. Instructions Consistent With the Charter, Etc. Unless otherwise
provided in this Agreement, Custodian shall act only upon Officer's
Certificates, Oral Instructions and/or Written Instructions. Custodian may
assume that any Officer's Certificate, Oral Instructions or Written Instructions
received hereunder are not in any way inconsistent with any provision of the
Charter or Code of Regulations or any resolution of the Company's Board of
Directors, or any committee thereof. Custodian shall be entitled to rely upon
any Oral Instructions or Written Instructions
6
actually received by Custodian pursuant to this Agreement, and upon any
certificate, oral instructions, or written instructions reasonably believed by
Custodian to be an Officer's Certificate, Oral Instructions or Written
Instructions. The Company agrees to forward to Custodian Written Instructions
confirming Oral Instructions in such manner that the Written Instructions are
received by Custodian at the close of business of the same day that such Oral
Instructions are given to Custodian. The Company agrees that the fact that such
confirming Written Instructions are not received by Custodian shall in no way
affect the validity of any of the transactions authorized by the Company by
giving Oral Instructions, and that Custodian's records with respect to the
content of Oral Instructions shall be controlling.
10. Transactions-Not Requiring Instructions. Custodian is authorized to
take the following action without Oral Instructions, Written Instructions, or an
Officer's Certificate:
(a) Collection of Income and Other Payments. Custodian shall,
subject to Paragraph 28(f) hereof:
(i) Collect and receive for the account of any Fund, all
income and other payments and distributions, including (without limitation)
stock dividends, rights, warrants and similar items, included or to be included
in the Property of any Fund, and promptly advise the Company of such receipt and
shall credit such income, as collected, to such Fund of the Company. From time
to time, Custodian may elect, but shall not be so obligated, to credit the
account with interest, dividends or principal payments on payable or contractual
settlement date, in anticipation of receiving same from a payor, central
depository, Securities Depository, broker or other agent employed by the Company
or Custodian. Any such crediting and posting shall be at the Company's sole
risk, and Custodian shall be authorized to reverse (A) any such advance posting
in the event it does not receive good funds from any such payor, central
depository, Securities Depository, broker or agent, and (B) any other payment or
crediting, including, without limitation, payments made by check or draft, in
the event it does not receive good funds or final payment;
(ii) With respect to securities of foreign issue, and subject
to Paragraph 27 hereof, effect collection of dividends, interest and other
income, and to promptly transmit to the Company all reports, written information
or notices actually received by Custodian as Custodian, including notices of any
call for redemption, offer of exchange, right of subscription, reorganization,
or other proceedings affecting such securities, or any default in payments due
thereon. It is understood, however, that Custodian shall be under no
responsibility for any failure or delay in effecting such collections or giving
such notice with respect to securities of foreign issue, regardless of whether
or not the relevant information is published in any financial service available
to it unless such failure or delay is due to Custodian's own negligence.
Collections of income in foreign currency are, to the extent possible, to be
converted into United States dollars unless otherwise instructed in writing, and
in effecting such conversion Custodian may use such methods or agencies as it
may see fit, including the facilities of its own foreign division at customary
rates. All risk and expenses incident to such collection and conversion are for
the account of the Funds and Custodian shall have no responsibility for
fluctuations in exchange rates affecting any such conversions;
7
(iii) Endorse and deposit for collection in the name of the
Company and each of its Funds, checks, drafts, or other orders for the payment
of money on the same day as received;
(iv) Receive and hold for the account of each of the Fund's
securities received by the Funds as a result of a stock dividend, share split-up
or reorganization, recapitalization, readjustment or other rearrangement or
distribution of rights or similar securities issued with respect to any
portfolio securities of the Funds held by Custodian hereunder;
(v) Present for payment and collect the amount payable upon
all securities which may mature or be called, redeemed or retired, or otherwise
become payable on the date such securities become payable, but, with respect to
calls, early redemptions, or early retirements, only if Custodian either (i)
receives a written notice of the same or (ii) notice of the same appears in one
or more of the publications then listed in Schedule II hereto, which Schedule
may be amended to add other publications at any time by Custodian without prior
notice to or consent from the Company and which may be amended to delete a
publication with the prior notice and consent from the Company;
(vi) Subject to Paragraphs 28(e) and (f) hereof, take any
action which may be necessary and proper in connection with the collection and
receipt of such income and other payments and the endorsement for collection of
checks, drafts and other negotiable instructions; and
(vii) With respect to domestic securities, to exchange
securities in temporary form for securities in definitive form, to effect an
exchange of the shares where the par value of stock is changed, and to surrender
securities at maturity or when advised by the Company or the investment adviser
to the Company of an earlier call for redemption, against payment therefor in
accordance with accepted industry practice. When fractional shares of stock of a
declaring corporation are received as a stock distribution, Custodian is
authorized to sell the fraction received and credit the Company's account.
Unless specifically instructed to the contrary in writing, Custodian is
authorized to exchange securities in bearer form for securities in registered
form. If any Property registered in the name of a nominee of Custodian is called
for partial redemption by the issuer of such Property, Custodian is authorized
to allot the called portion to the respective beneficial holders of the Property
in such manner deemed to be fair and equitable by Custodian in its reasonable
discretion.
(b) Miscellaneous Transactions. Custodian is authorized to deliver
or cause to be delivered Property against payment or other consideration or
written receipt therefor in the following cases:
(i) for examination by a broker selling for the account of the
Company in accordance with street delivery custom;
(ii) for the exchange for interim receipts or temporary
securities for definitive securities;
(iii) for transfer of securities into the name of the Funds or
Custodian or a nominee of either, or for exchange of securities for a different
number of bonds, certificates, or
8
other evidence, representing the same aggregate face amount or number of units
bearing the same interest rate, maturity date and call provisions, if any;
provided that, in any such case, the new securities are to be delivered to
Custodian.
11. Transactions Requiring Instructions. Upon receipt of Oral or
Written Instructions, and not otherwise, Custodian, directly or through the use
of a Securities Depository or the Book-Entry System, shall:
(a) execute and deliver to such persons as may be designated
in such Oral or Written Instructions, proxies, consents, authorizations, and any
other instruments whereby the authority of the Funds as owners of any securities
may be exercised;
(b) deliver any securities held for any Fund against receipt
of other securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or recapitalization of any
corporation, or the exercise of any conversion privilege;
(c) deliver any securities held for any Fund to any protective
committee, reorganization committee or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization or sale of
assets of any corporation, against receipt of such certificates or deposit,
interim receipts or other instruments or documents as may be issued to it to
evidence such delivery;
(d) make such transfers or exchanges of the assets of any Fund
and take such other steps as shall be stated in said instructions to be for the
purposes of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the Funds;
(e) subject to Paragraph 25(b) hereof, release securities
belonging to any Fund to any bank or trust company for the purpose of pledge or
hypothecation to secure any loan incurred by such Fund; provided, however, that
securities shall be released only upon payment to Custodian of the monies
borrowed, except that in cases where additional collateral is required to secure
a borrowing already made, subject to proper prior authorization, further
securities may be released for that purpose; and pay such loan upon redelivery
to it of the securities pledged or hypothecated therefor and upon surrender of
the note or notes evidencing the loan;
(f) deliver any securities held for any Fund upon the exercise
of a covered call option written by such Fund on such securities;
(g) release and deliver securities owned by a Fund in
connection with any repurchase agreement entered into on behalf of such Fund,
but subject to Paragraph 28(m) hereof, only on receipt of payment therefor; and
pay out monies of such Fund in connection with such repurchase agreements, but
only upon the delivery of the securities;
(h) otherwise transfer, exchange or deliver securities in
accordance with Oral or Written Instructions specifying the purpose of such
transfer, including without limitation, loans of securities, short sales, or
reverse repurchase agreements, and subject to Paragraph 7(a) hereof.
9
12. Segregated Accounts. Custodian shall upon receipt of Written or
Oral Instructions establish and maintain a segregated account or accounts on its
records for and on behalf of any Fund, into which account or accounts shall be
credited, but only pursuant to an Officer's Certificate or Written Instructions
specifying the particular securities and/or amount of cash, cash and/or
securities, including securities in the Book-Entry System (i) for the purposes
of compliance by the Funds and the Company with the procedures required by a
securities or option exchange, (ii) for the purpose of compliance by the Funds
and the Company with the 1940 Act and Release No. 10666 or any subsequent
release or releases of the SEC relating to the maintenance of segregated
accounts by registered investment companies, and (iii) for other proper
corporate purposes.
13. Dividends and Distributions.
----------------------------
(a) The Company shall furnish Custodian with appropriate
evidence of action by the Company's Board of Directors declaring and authorizing
the payment of any dividends and distributions. Upon receipt by Custodian of an
Officer's Certificate with respect to dividends and distributions declared by
the Company's Board of Directors and payable to shareholders of any Fund who are
entitled to receive cash for fractional shares and those who have elected in the
proper manner to receive their distributions on dividends in cash, and in
conformance with procedures mutually agreed upon by Custodian and the Company,
and the Company's administrator or transfer agent, Custodian shall pay to the
Fund's transfer agent, as agent for the shareholders, an amount equal to the
amount indicated in said Officer's Certificate as payable by the Fund to such
shareholders for distribution in cash by the transfer agent to such
shareholders.
(b) Custodian may enter into separate custodial agreements
with various futures commission merchants ("FCMs") that the Company uses (each
an "FCM Agreement"), pursuant to which the Funds' margin deposits in any
transactions involving futures contracts and options on futures contracts will
be held by Custodian in accounts (each an "FCM Account") subject to the
disposition by the FCM involved in such contracts in accordance with the
customer contract between the FCM and the Company ("FCM Contract"), SEC rules
governing such segregated accounts, Commodity Futures Trading Commission
("CFTC") rules and the rules of the applicable commodities exchange. Such FCM
Agreements shall only be entered into by Custodian upon receipt by Custodian of
Written Instructions from the Company which state that (i) an FCM Contract has
been entered into; (ii) the Company is in compliance with all the rules and
regulations of the CFTC; and (iii) the FCM Agreement is acceptable to the
Company. Transfers of initial margin shall be made into an FCM Account only upon
Written Instructions; transfers of premium and variation margin may be made into
an FCM Account pursuant to Oral Instructions. Transfers of funds from an FCM
Account to the FCM for which Custodian holds such an account may only occur in
accordance with the terms of the FCM Agreement.
14. Purchase of Securities. Promptly after each purchase of securities
by the Company on behalf of any Fund, the Company shall deliver to Custodian
Oral or Written Instructions specifying with respect to each such purchase: (a)
the name of the issuer and the title of the securities, (b) the number of shares
of the principal amount purchased and accrued interest, if any, (c) the dates of
purchase and settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase, (f) the name of the person from whom or the broker
through
10
whom the purchase was made and (g) the Fund for which the purchase was
made. Custodian shall upon receipt of securities purchased by or for the Company
pay out of the monies held for the account of the Company the total amount
payable to the person from whom or the broker through whom the purchase was
made, provided that the same conforms to the total amount payable as set forth
in such Oral or Written Instructions.
15. Sales of Securities. Promptly after each sale of securities by the
Funds or the Company shall deliver to Custodian Oral or Written Instructions,
specifying with respect to each such sale: (a) the name of the issuer and the
title of the security, (b) the number of shares or principal amount sold, and
accrued interest, if any, (c) the dates of sale, (d) the sale price per unit,
(e) the total amount payable to the Company upon such sale, (f) the name of the
broker through whom or the person to whom the sale was made and (g) the Fund for
which the sale was made. Custodian shall, subject to Paragraph 28(m) hereof,
deliver the securities against payment of the total amount payable to the
Company upon such sale, provided that the same conforms to the total amount
payable as set forth in such Oral and Written Instructions.
16. Records. The books and records pertaining to the Funds and the
Company which are in the possession of Custodian shall be the property of the
Company. Such books and records shall be prepared and maintained as required by
the 1940 Act and other applicable securities laws and rules and regulations. The
SEC, the Company, or the Company's authorized representatives, shall have access
to such books and records at all times during Custodian's normal business hours.
Upon the reasonable request of the Company, copies of any such books and records
shall be provided by Custodian to the Company or the Company's authorized
representative, and the Company shall reimburse Custodian reasonable expenses
for providing such copies. Upon reasonable request of the Company, Custodian
shall provide in hard copy, tape or on micro-film, or such other medium as
agreed to among the Company and Custodian, and any books and records maintained
by Custodian.
17. Reports.
-------
(a) Custodian shall furnish the Company the following reports:
(i) such periodic and special reports as the Company may
reasonably request from time to time;
(ii) a monthly statement summarizing all transactions and
entries for the account of each Fund;
(iii) a monthly report of portfolio securities belonging
to each Fund showing the adjusted average cost of each issue and market
value at the end of such month;
(iv) a monthly report of the cash account of each Fund
showing disbursements;
(v) the reports to be furnished to the Company pursuant to
Rule 17f-4 under the 1940 Act; and
11
(vi) such other information as may be agreed upon from
time to time between the Company and Custodian.
(b) Subject to Paragraphs 5 and 27(g) hereof, Custodian shall
transmit promptly to the Company any proxy statement, proxy materials, notice of
a call or conversion or similar communications actually received by Custodian as
custodian of the Property.
(c) Custodian shall report as the market value at the end of
each month the last closing bid, offer or sale price to the extent, and as the
same, is furnished to Custodian by a pricing or similar service utilized or
subscribed to by Custodian. Custodian shall not be responsible for, have any
liability with respect to, or be under any duty to inquire into, nor deemed to
make any assurances with respect to, the accuracy or completeness of such
information, even if The Bank of New York in performing services for others,
including services similar to those performed hereunder, receives different
valuations of the same or different securities of the same issuer.
18. Cooperation with Accountants. Custodian shall cooperate with the
Company's independent certified public accountants and shall take all reasonable
action in the performance of its obligations under this Agreement, to assure
that the necessary information is made available to such accountants.
19. Confidentiality. Custodian agrees on behalf of itself and its
employees to treat all record and other information relative to the Company, its
prior, present or potential shareholders, its service providers and its prior,
present or potential customers, as confidential information, and to protect and
safeguard the same to the extent required by applicable law, provided, however,
that Custodian may make such disclosure as required by applicable law,
regulation, court order, decrees or legal process and upon receipt of any of the
foregoing requiring such disclosure, Custodian's only obligation shall be to
notify the Company thereof. Custodian further agrees not to otherwise use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Company.
20. Equipment Failures. In the event of equipment failures beyond
Custodian's control, Custodian shall take reasonable steps to minimize service
interruptions but shall not have any further liability with respect thereto.
Notwithstanding the foregoing, Custodian shall maintain sufficient back up
electronic data processing equipment to enable Custodian to fulfill its
obligations under this Agreement consistent with standard industry practices.
21. Right to Receive Advice.
-----------------------
(a) Advice of Fund. If Custodian shall be in doubt as to any
action to be taken or omitted by it, either may request, and shall receive, from
the Company clarification or advice, including Oral or Written Instructions.
(b) Advice of Counsel. If Custodian shall be in doubt as to
any question of law involved in any action to be taken or omitted by Custodian,
it may request at its option advice from its own counsel, at its own expense, or
advice from the Company's counsel.
12
(c) Conflicting Advice. In case of conflict between
directions, advice or Oral or Written Instructions received by Custodian
pursuant to subparagraph (a) of this paragraph and advice received by Custodian
pursuant to subparagraph (b) of this paragraph, Custodian shall be entitled to
rely on and follow the advice received pursuant to subparagraph (b) alone.
(d) Protection of Custodian. Custodian shall be protected in
any action or inaction which it takes or omits to take in reliance on any
directions, advice or Oral or Written Instructions received pursuant to
subparagraphs (a) or (b) of this section which it, after receipt of any such
directions, advice or Oral or Written Instructions, in good faith reasonably
believes to be consistent with such directions, advice or Oral or Written
Instructions, as the case may be. Nothing in this Paragraph 21 shall be
construed as imposing upon Custodian any obligation (i) to seek such directions,
advice or Oral or Written Instructions, or (ii) to act in accordance with such
directions, advice or Oral or Written Instructions when received, unless, under
the terms or another provision of this Agreement, the same is a condition to
Custodian's properly taking or omitting to take such action. Nothing in this
Paragraph 21(d) shall excuse Custodian when an action or omission on the part of
Custodian constitutes willful misfeasance or bad faith, or negligence or
reckless disregard by Custodian of its duties under this Agreement.
22. Compliance with Governmental Rules and Regulations. Custodian
undertakes to comply with the laws, rules and regulations of governmental
authorities having jurisdiction over Custodian and its express duties hereunder.
23. Compensation. As compensation for the services rendered by
Custodian during the term of this Agreement, the Company shall pay to Custodian,
in addition to reimbursement of its out-of-pocket expenses, such compensation as
may be agreed upon from time to time in writing by the Company and Custodian as
set forth in Schedule III.
24. Indemnification. The Company agrees to indemnify Custodian against,
and hold harmless from all taxes, charges, expenses (including reasonable fees
and expenses of counsel), assessments, claims, losses, demands and liabilities
whatsoever (including, without limitation, liabilities arising under the 1933
Act, the 1934 Act and the 1940 Act, and any state and foreign securities laws,
all as currently in effect or as may be amended from time to time) and expenses,
including without limitation, reasonable attorney's fees and disbursements,
howsoever arising or incurred because of or in connection with this Agreement,
except for such liability, claim, loss, demand, charge, expense, tax or
assessment arising out of Custodian's, or such nominees', willful misconduct or
negligence or reckless disregard of its duties under this Agreement. For the
purposes of this Agreement, including, without limitation, for purposes of
Paragraphs 24 and 28, neither Custodian's acceptance of Instructions in
accordance with Paragraph 26A nor Custodian's use of Foreign Sub-Custodians
pursuant to agreements that do not permit actual examination by independent
public accountants, nor the denial of examination by any Foreign Sub-Custodian
as defined in Paragraph 27, shall, in and of itself, constitute, or be deemed to
constitute, a breach by Custodian of this Agreement or negligence, willful
misconduct, or reckless disregard of its duties by Custodian, provided the
relevant agreement between Custodian and a Foreign Sub-Custodian satisfies the
requirements of Rule 17f-5.
13
25. Overdrafts or Indebtedness.
--------------------------
(a) Custodian shall advance funds under this Agreement with
respect to any Fund which results in an overdraft because the moneys held by
Custodian in the separate account for such Fund shall be insufficient to pay the
total amount payable upon a purchase of securities by such Fund, as set forth in
an Officer's Certificate or Oral or Written Instructions, or which results in an
overdraft in the separate account of such Fund for some other reason, or if the
Company is for any other reason indebted to Custodian, including any
indebtedness to The Bank of New York under the Company's Cash Management and
Related Services Agreement, (except a borrowing for investment or for temporary
or emergency purposes using securities as collateral pursuant to a separate
agreement and subject to the provisions of Paragraph 25(b) hereof), such
overdraft or indebtedness shall be deemed to be a loan made by Custodian to the
Company for such Fund payable on demand and shall bear interest from the date
incurred at a rate per annum (based on a 360-day year for the actual number of
days involved) equal to the overdraft rate specified in Schedule IV to this
Agreement. In addition, the Company hereby agrees that Custodian shall have a
continuing lien, security entitlement and security interest in and to any
property at any time held by it for the benefit of such Fund or in which the
Fund may have an interest which is then in Custodian's possession or control or
in possession or control of any third party acting on Custodian's behalf. The
Company authorizes Custodian, in its sole discretion, at any time to charge any
such overdraft or indebtedness together with interest due thereon against any
balance of account standing to such Fund's credit on Custodian's books. In
addition, the Company hereby covenants that on each Business Day on which either
it intends to enter a Reverse Repurchase Agreement and/or otherwise borrow from
a third party, or which next succeeds a Business Day on which at the close of
business the Company had outstanding a Reverse Repurchase Agreement or such a
borrowing, it shall prior to 1:00 p.m., New York City time, advise Custodian, in
writing, of each such borrowing, shall specify the Fund to which the same
relates, and shall not incur any indebtedness not so specified other than from
Custodian.
(b) The Company will cause to be delivered to Custodian by any
bank (including, if the borrowing is pursuant to a separate agreement,
Custodian) from which it borrows money for investment or for temporary or
emergency purposes using securities held by Custodian hereunder as collateral
for such borrowings, a notice or undertaking in the form currently employed by
such bank setting forth the amount which such bank will loan to the Company
against delivery of a stated amount of collateral. The Company shall promptly
deliver to Custodian Written Instruction specifying with respect to each such
borrowing: (a) the Fund to which such borrowing relates; (b) the name of the
bank, (c) the amount and terms of the borrowing, which may be set forth by
incorporating by reference an attached promissory note, duly endorsed by the
Fund, or other loan agreement, (d) the time and date, if known, on which the
loan is to be entered into, (e) the date on which the loan becomes due and
payable, (f) the total amount payable to the Fund on the borrowing date, (g) the
market value of securities to be delivered as collateral for such loan,
including the name of the issuer, the title and the number of shares or the
principal amount of any particular securities, and (h) a statement specifying
whether such loan is for investment purposes or for temporary or emergency
purposes and that such loan is in conformance with the 1940 Act and the Fund's
prospectus. Custodian shall deliver on the borrowing date specified in Written
Instructions the specified collateral and the executed promissory note, if any,
against delivery by the lending bank of the total amount of the loan payable,
provided that the same conforms to the total amount payable as set forth in such
Written
14
Instructions. Custodian may, at the option of the lending bank, keep such
collateral in its possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory note or loan
agreement. Custodian shall deliver such securities as additional collateral as
may be specified in Written Instructions to collateralize further any
transaction described in this Paragraph 25(b). The Company shall cause all
securities released from collateral status to be returned directly to Custodian,
and Custodian shall receive from time to time such return of collateral as may
be tendered to it. In the event that the Company fails to specify in Written
Instructions the Fund, the name of the issuer, the title and number of shares or
the principal amount of any particular securities to be delivered as collateral
by Custodian, Custodian shall not be under any obligation to deliver any
securities.
26A. Instructions
------------
(a) It is understood and agreed that Custodian may, from time
to time, provide software to the Company for purposes of enabling a Fund to
transmit Instructions to Custodian (the "Software"). Such Software has been
designed to include password protection or other features to restrict the use of
the Software to Authorized Persons; provided, however, that the Custodian makes
no warranty or representations of any kind with respect to such protections or
features, express or implied, including, but not limited to, any implied
warranties of merchantability or fitness for a particular purpose. The Company
and the Custodian shall use commercially reasonable efforts to develop other
mechanisms (i) to enable the Company to restrict the use of the Software to
Authorized Persons, (ii) to identify transmissions from a terminal other than an
authorized terminal, and (iii) for the prompt and accurate transmission of
Instructions by Authorized Persons to Custodian. It is further understood and
agreed that Custodian may provide specialized hardware or other equipment to
enable the Company and the Funds to utilize the Software. With respect to any
such Software, Custodian grants to the Company and its service providers a
personal, nontransferable and nonexclusive license to use the Software solely
for the purpose of transmitting Instructions to, and receiving communications
from, Custodian in connection with its account(s). The Company and its service
providers agree not to sell, reproduce, lease or otherwise provide, directly or
indirectly, the Software or any portion thereof to any third party without the
prior written consent of Custodian. At no time shall the Company be obligated to
use the Software to transmit Instructions to Custodian.
(b) The Company shall obtain and maintain at its own cost and
expense all equipment and services, including but not limited to communications
services, necessary for it to utilize the Software and transmit Instructions to
Custodian; provided, however, that the parties acknowledge and agree that if any
specialized equipment is necessary to enable the Company to utilize the
Software, Custodian shall, at its own expense, provide and maintain such
equipment.
(c) The Company acknowledges that the Software, all data bases
made available to the Company by utilizing the Software (other than data bases
relating solely to the assets of the Funds and transactions with respect
thereto), and any proprietary data, processes, information and documentation
(other than those which are or become part of the public domain or are legally
required to be made available to the public) (collectively, the "Information"),
are the exclusive and confidential property of Custodian. The Company shall keep
the Information confidential by using the same care and discretion that the
Company uses with respect to its own confidential property and trade secrets and
shall neither make nor permit any disclosure without
15
the prior written consent of Custodian. Upon termination of this Agreement or
the Software license granted hereunder for any reason, the Company shall return
to Custodian all copies of the Information which are in its possession or under
its control or which the Company distributed to third parties.
(d) Custodian reserves the right to modify the Software from
time to time upon reasonable prior notice and the Company shall, if it desires
in its sole discretion to continue to use the Software, install new releases of
the Software as Custodian may direct. The Company agrees not to modify or
attempt to modify the Software without Custodian's prior written consent. The
Company acknowledges that any modifications to the Software, whether by the
Company or Custodian and whether with or without Custodian's consent, shall
become the property of Custodian.
(e) Where the method for transmitting Instructions by the
Company involves an automatic systems acknowledgment to the Company by Custodian
of its receipt of such Instructions, including any transmission of Instructions
using the Software, then (i) if an acknowledgment is not actually received by
the Company, Custodian shall not be deemed to have received any such
Instructions, and (ii) if an acknowledgment is actually received by the Company,
the Custodian shall be deemed to have received such Instructions and shall be
responsible for any error, omission, interruption or delay in connection with
the transmission of such Instructions; provided, however, that the Company shall
promptly review all acknowledgments actually received and notify the Custodian
in the event of any apparent discrepancy.
(f) (i) The Company agrees that where it delivers to Custodian
Instructions hereunder using the Software, it shall be the Company's sole
responsibility to ensure that only persons duly authorized by the Company and
the correct number of such persons transmit such Instructions to Custodian and
the Company will cause all such persons to treat applicable use and
authorization codes, passwords and authentication keys with extreme care, and
authorizes Custodian to act in accordance with and rely upon Instructions
received by it pursuant hereto using the Software.
(ii) The Company hereby represents, acknowledges and agrees
that it is fully informed of the protections and risks associated with the
various methods of transmitting Instructions to Custodian and that there may be
more secure methods of transmitting Instructions to Custodian than the method(s)
selected by the Company.
(iii) With respect to all Oral Instructions and all Written
Instructions other than Instructions delivered to Custodian using the Software
provided by Custodian, Custodian shall exercise all commercially reasonable
efforts to form a reasonable belief that each such instruction has been given by
an Authorized Person and, where required, signed by an appropriate number of
Authorized Person(s).
(g) The Company shall notify Custodian of any errors,
omissions or interruptions in, or delay or unavailability of, its ability to
send Instructions using the Software provided by Custodian as promptly as
practicable, and in any event within 24 hours after the earliest of (i)
discovery thereof, (ii) the business day on which discovery should have occurred
16
through the exercise of reasonable care and (iii) in the case of any error, the
date of actual receipt of the earliest notice which reflects such error, it
being agreed that discovery and receipt of notice may only occur on a business
day. Custodian shall, as promptly as practicable, and in any event within 24
hours after the earliest of (i) discovery thereof, (ii) the business day on
which discovery should have occurred through the exercise of reasonable care and
(iii) in the case of any error, the date of actual receipt of the earliest
notice which reflects such error, it being agreed that discovery and receipt of
notice may only occur on a business day, advise the Company whenever Custodian
learns or reasonably should have learned, of any errors, omissions or
interruption in, or delay or unavailability of, the Company's ability to send
Instructions using the Software provided by Custodian.
26B. FX Transactions
----------------
(a) Whenever a Fund shall enter into an FX Transaction, the
Fund shall promptly deliver to Custodian a Certificate or Oral Instructions
specifying with respect to such FX Transaction: (a) the Series to which such FX
Transaction is specifically allocated; (b) the type and amount of Currency to be
purchased by the Fund; (c) the type and amount of Currency to be sold by the
Fund; (d) the date on which the Currency to be purchased is to be delivered; (e)
the date on which the Currency to be sold is to be delivered; and (f) the name
of the person from whom or through whom such Currencies are to be purchased and
sold. Unless otherwise instructed by a Certificate or Oral Instructions,
Custodian shall deliver, or shall instruct a Foreign Sub-Custodian to deliver,
the Currency to be sold on the date on which such delivery is to be made, as set
forth in the Certificate, and shall receive, or instruct a Foreign Sub-Custodian
to receive, the Currency to be purchased on the date as set forth in the
Certificate.
(b) Where the Currency to be sold is to be delivered on the
same day as the Currency to be purchased, as specified in the Certificate or
Oral Instructions, Custodian or a Foreign Sub-Custodian may arrange for such
deliveries and receipts to be made in accordance with the customs prevailing
from time to time among brokers or dealers in Currencies, and such receipt and
delivery may not be completed simultaneously. The Fund assumes all
responsibility and liability for all credit risks involved in connection with
such receipts and deliveries, which responsibility and liability shall continue
until the Currency to be received by the Fund has been received in full.
(c) Any foreign exchange transaction effected by Custodian in
connection with this Agreement may be entered with Custodian, any office, branch
or subsidiary of The Bank of New York, or any Foreign Sub-Custodian (as defined
below) acting as principal or otherwise through customary banking channels. The
Fund may issue a standing Certificate with respect to foreign exchange
transactions but Custodian may establish rules or limitations concerning any
foreign exchange facility made available to the Fund. The Fund shall bear all
risks of investing in securities or holding Currency. Without limiting the
foregoing, the Fund shall bear the risks that rules or procedures imposed by a
Foreign Sub-Custodian or foreign depositories, exchange controls, asset freezes
or other laws, rules, regulations or orders shall prohibit or impose burdens or
costs on the transfer to, by or for the account of the Fund of Securities or any
cash held outside the Fund's jurisdiction or denominated in Currency other than
its home jurisdiction or the conversion of cash from one Currency into another
Currency. Custodian shall not be obligated to substitute another Currency for a
Currency (including a
17
Currency that is a component of a Composite Currency Unit) whose
transferability, convertibility or availability has been affected by such law,
regulation, rule or procedure. Neither Custodian nor any Foreign Sub-Custodian
shall be liable to the Fund for any loss resulting from any of the foregoing
events.
27. Duties of Custodian with Respect to Property of any Fund Held
-------------------------------------------------------------
Outside of the United States.
----------------------------
(a) Custodian is authorized and instructed to employ, as
sub-custodian for each Fund's foreign securities and other assets, the foreign
banking institutions and foreign securities depositories and clearing agencies
selected from time to time by Custodian as the Foreign Custody Manager appointed
by the Company's Board of Directors ("Foreign Sub-Custodians") to carry out
their respective responsibilities in accordance with the terms of the
sub-custodian agreement between each such Foreign Sub-Custodian and Custodian
(each such agreement, a "Foreign Sub-Custodian Agreement"). Upon receipt of an
Officer's Certificate, the Company may designate any additional foreign
sub-custodian with which Custodian has an agreement for such entity to act as
Custodian's agent, as its sub-custodian and any such additional foreign
sub-custodian shall be deemed a Foreign Sub-Custodian hereunder. Upon receipt of
an Officer's Certificate, Custodian shall cease using any one or more Foreign
Sub-Custodians for the Fund's assets.
(b) Each Foreign Sub-Custodian Agreement shall be
substantially in the form delivered to the Company herewith and will not be
amended in a way that materially adversely affects the Company without the
Company's prior written consent.
(c) Custodian shall identify on its books as belonging to each
Fund the Foreign Securities of such Fund held by each Foreign Sub-Custodian. At
the election of the Company, it shall be entitled to be subrogated to any claims
by the Company or any Fund against a Foreign Sub-Custodian as a consequence of
any loss, damage, cost, expense, liability or claim sustained or incurred by the
Company or any Fund if and to the extent that the Company or such Fund has been
made whole by Custodian for any such loss, damage, cost, expense, liability or
claim.
(d) Upon request of the Company, Custodian will, consistent
with the terms of the applicable Foreign Sub-Custodian Agreement, use reasonable
efforts to arrange for the independent accountants of the Company to be afforded
access to the books and records of any Foreign Sub-Custodian insofar as such
books and records relate to the performance of such Foreign Sub-Custodian under
its agreement with Custodian on behalf of the Company.
(e) Custodian will supply to the Company from time to time, as
mutually agreed upon, statements in respect of the securities and other assets
of each Fund held by Foreign Sub-Custodians, including but not limited to, an
identification of entities having possession of each Fund's Foreign Securities
and other assets, and advices or notifications of any transfers of Foreign
Securities to or from each custodial account maintained by a Foreign
Sub-Custodian for Custodian on behalf of the Fund.
18
(f) Custodian agrees that it will use reasonable care in
monitoring compliance by each Foreign Sub-Custodian with the terms of the
relevant Foreign Sub-Custodian Agreement and that if it learns of any breach of
such Foreign Sub-Custodian Agreement believed by Custodian to have a material
adverse effect on the Company or any Fund it will promptly notify the Company in
writing of such breach. Custodian also agrees to use reasonable and diligent
efforts to enforce its rights under the relevant Foreign Sub-Custodian
Agreement.
(g) Custodian shall transmit promptly to the Company all
notices, reports or other written information received pertaining to the
Company's Foreign Securities, including without limitation, notices of corporate
action, proxies and proxy solicitation materials.
(h) Notwithstanding any provision of this Agreement to the
contrary, settlement and payment for securities received for the account of the
Company or any Fund and delivery of securities maintained for the account of the
Company or any Fund may be effected in accordance with the customary or
established securities trading or securities processing practices and procedures
in the jurisdiction or market in which the transaction occurs, including,
without limitation, delivery of 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.
(i) With respect to any losses or damages arising out of or
relating to any actions or omissions of any Foreign Sub-Custodian, the sole
responsibility and liability of Custodian shall be to take all appropriate and
reasonable action at the Company's expense to recover such loss or damage from
the Foreign Sub-Custodian. It is expressly understood and agreed that
Custodian's sole responsibility and liability shall be limited to amounts so
recovered from the Foreign Sub-Custodian.
28. Concerning Custodian.
--------------------
(a) (i) Custodian shall exercise care and diligence and act in
good faith and use all commercially reasonable efforts in the performance of its
duties hereunder. Custodian shall be responsible to the Company for its own
failure, or the failure of any sub-custodian that it shall appoint (other than a
foreign sub-custodian referred to in Paragraph 27 or a sub-custodian appointed
by Custodian at the specific direction of the Company) or that of its employees
or agents, to perform its duties, obligations or responsibilities in accordance
with this Agreement, but only to the extent that such failure results from acts
or omissions that constitute willful misfeasance, bad faith or negligence on the
part of Custodian, or on the part of its employees or agents, or reckless
disregard of such duties, obligations and responsibilities.
(ii) Without limiting the generality of the foregoing or
any other provision of this Agreement, in no event shall Custodian be liable to
the Fund or any third party nor, except as otherwise provided in this
subparagraph for special, indirect or consequential damages or lost profits or
loss of business, arising under or in connection with this Agreement, even if
previously informed of the possibility of such damages and regardless of the
form of action. Custodian may, with respect to questions of law arising under
any FCM Agreement, apply for and obtain the advice and opinion of counsel to the
Company at the expense of the Company, or of its own counsel at its own expense,
and shall be fully protected with respect to
19
anything done or omitted by it in good faith in conformity with such advice or
opinion. Custodian shall be liable to the Company for any loss or damage
resulting from the use of the Book-Entry System or any Securities Depository
arising by reason of any negligence or willful misconduct on the part of
Custodian or any of its employees or agents.
(iii) Custodian's liability pursuant to the last sentence
of subparagraph (a)(i) shall include, but not be limited to, reimbursing the
Company for court-ordered damage awards, fines, penalties, and
judicially-approved settlements (and attorney's fees and disbursements relating
thereto) arising out of or in connection with the conduct giving rise to such
liability.
(iv) If the Company receives notice of the commencement of
any action, suit, or proceeding (an "Action"), or notice that any Action may be
commenced, for which Custodian may be liable to the Company pursuant to this
Paragraph 28, the Company shall give notice to Custodian of the commencement of
the Action or of the possibility that an Action will be commenced. Any omission
to notify Custodian will not relieve Custodian from any liability which it may
have under this Paragraph, except to the extent the failure to notify Custodian
prejudices the rights of Custodian. Custodian will be entitled at its sole
expense and liability, to exercise full control of the defense, compromise or
settlement of any such Action, provided that Custodian (1) notifies the Company
in writing of Custodian's intention to assume such defense; and (2) retains
legal counsel reasonably satisfactory to the Company to conduct the defense of
such Action. If Custodian advises the Company that it does not wish to exercise
full control of any defense, compromise or settlement of any Action, Custodian
shall be responsible for the fees and expenses of counsel selected by the
Company, in addition to any other amounts for which Custodian may be liable
pursuant to this Paragraph 28. The other person will cooperate with the person
assuming the defense, compromise or settlement of any Action in accordance with
this Paragraph in any manner that such person reasonably may request. If
Custodian so assumes the defense of any such Action, the Company will have the
right to employ a separate counsel and to participate in (but not control) the
defense, compromise or settlement of the Action, but the fees and expenses of
such counsel will be at the expense of the Company unless (a) Custodian has
agreed to pay such fees and expenses, (b) any relief other than the payment of
money damages is sought against the Company, or (c) the Company has been advised
by its counsel that there may be one or more defenses available to it which are
different from or additional to those available to Custodian and that a conflict
of interest therefore exists, and in any such case that portion of the fees and
expenses of such separate counsel that are reasonably related to matters for
which Custodian is liable pursuant to this Paragraph will be paid by Custodian.
The Company will not settle or compromise any such Action for which Custodian is
liable pursuant to this Paragraph without the prior written consent of
Custodian, unless Custodian has failed, after reasonable notice, to undertake
control of such Action in the manner provided in this Paragraph. Custodian will
not settle or compromise any such Action in which any relief other than the
payment of money damages is sought against the Company without the consent of
the Company, such consent not to be unreasonably withheld. In the event that
Custodian intends to settle or compromise any Action in which solely money
damages are sought, Custodian shall give the Company fifteen (15) business days
prior written notice.
(b) Without limiting the generality of the foregoing,
Custodian shall be under no obligation to inquire into, and shall not be liable
for:
20
(i) the validity of the issue of any securities
purchased, sold, or written by or for the Company or any Fund, the legality of
the purchase, sale or writing thereof, or the propriety of the amount paid or
received therefor;
(ii) the legality of the sale or redemption of any
Shares, or the propriety of the amount to be received or paid therefor;
(iii) the legality of the declaration or payment of
any dividend by the Company;
(iv) the legality of any borrowing by the Company
using securities as collateral;
(v) the legality of any loan of portfolio securities,
or under any duty or obligation to see to it that any cash collateral delivered
to it by a broker, dealer, or financial institution or held by it at any time as
a result of such loan of portfolio securities is adequate collateral for or
against any loss Custodian, the Company or any Fund might sustain as a result of
such loan. Custodian specifically, but not by way of limitation, shall not be
under any duty or obligation periodically to check or notify the Company or any
Fund that the amount of such cash collateral held by Custodian for the Company
is sufficient collateral for the Company, but such duty or obligation shall be
the sole responsibility of the Company. In addition, Custodian shall be under no
duty or obligation to see that any broker, dealer or financial institution to
which portfolio securities are lent makes payment to it of any dividends or
interest which are payable to or for the account of the Company during the
period of such loan or at the termination of such loan, provided, however, that
Custodian shall promptly notify the Company in the event that such dividends or
interest are not paid and received when due; or
(vi) the sufficiency or value of any amounts of money
and/or securities held in any segregated account described in Paragraph 12(a)
hereof in connection with transactions by the Funds, or whether such segregated
account provides the compliance intended to be achieved. In addition, Custodian
shall not be under any duty or obligation to see that any broker, dealer, FCM or
Clearing Member makes payment to the Fund of any variation margin payment or
similar payment which the Fund may be entitled to receive from such broker,
dealer, FCM or Clearing Member, to see that any payment received by Custodian
from any broker, dealer, FCM or Clearing Member is the amount the Company is
entitled to receive, or to notify the Company or a Fund of Custodian's receipt
or non-receipt of any such payment.
(c) Custodian shall not be liable for, or considered to be
sub-custodian or custodian of, any money, whether or not represented by any
check, draft, or other instrument for the payment of money, received by
Custodian on behalf of the Company until Custodian actually receives and
collects such money directly or by the final crediting of the account
representing the Fund's interest at the Book-Entry System or a Securities
Depository.
(d) Custodian shall not have any responsibility or be liable
for ascertaining or acting upon any calls, conversions, exchange offers,
tenders, interest rate changes or similar matters relating to securities held in
a Securities Depository, unless Custodian shall have actually received timely
notice from such Securities Depository. In no event shall Custodian have any
21
responsibility or liability for the failure of any Securities Depository to
collect, or for the late collection or late crediting by a Securities Depository
of any amount payable upon securities deposited in a Securities Depository which
may mature or be redeemed, retired, called or otherwise become payable. Upon
receipt of Written Instructions from the Company of an overdue amount on
securities held in a Securities Depository Custodian shall make a claim against
a Securities Depository on behalf of the Company, except that Custodian shall
not be under any obligation to appear in, prosecute or defend any action suit or
proceeding in respect to any securities held by a Securities Depository which in
its opinion may involve it in expense or liability, unless indemnity
satisfactory to it against all expense and liability be furnished as often as
may be required.
(e) Custodian shall not be under any duty or obligation to
take action to effect collection of any amount due to the Company from a
transfer agent of the Company nor to take any action to effect payment or
distribution by the transfer agent of the Company of any amount paid by
Custodian to the transfer agent of the Company in accordance with this
Agreement.
(f) Custodian shall not be under any duty or obligation to
take action to effect collection of any amount, if the securities upon which
such amount is payable are in default, or if payment is refused after due demand
or presentation, unless and until (i) it shall be directed to take such action
by Written Instructions and (ii) it shall be assured to its reasonable
satisfaction of reimbursement of its costs and expenses in connection with any
such action.
(g) Custodian may in addition to the employment of Foreign
Sub-Custodians pursuant to Paragraphs 7 and 27, hereof appoint one or more
banking institutions as Depository or Depositories, as a sub-custodian or as
sub-custodians, or as a co-custodian or as co-custodians, including, but not
limited to, banking institutions located in foreign countries, of securities and
moneys at any time owned by the Fund, upon such terms and conditions as may be
approved in an Officer's Certificate or contained in an agreement executed by
Custodian and the Company and the appointed institution.
(h) Custodian shall not be under any duty or obligation (i) to
ascertain whether any securities at any time delivered to, or held by it or by
any Foreign Sub-Custodian, for the account of the Company and specifically
allocated to a Fund are such as properly may be held by the Company or such Fund
under the provisions of its Prospectus, or (ii) to ascertain whether any
transactions by the Fund, whether or not involving Custodian, are such
transactions as may properly be engaged in by the Fund.
(i) Custodian shall charge its compensation and any expenses
with respect to the Funds of the Company incurred by Custodian in the
performance of its duties under this Agreement only against the money of the
Fund or Funds of the Company from which such compensation or expenses is
actually due and payable, and under no circumstances shall any compensation or
expenses due to Custodian be considered to be a joint, or joint and several,
obligation of the Funds of the Company. To the extent that Custodian is entitled
to recover from the Company any loss, damage, liability or expense (including
counsel fees) under this Agreement, Custodian shall charge the amount due in
respect of such loss, damage, liability or expense (including counsel fees) only
against the money held by it for the Fund or Funds of the Company that is/are
identified by the Company in an Officer's Certificate, unless and until the
22
Company instructs Custodian by an Officer's Certificate to charge against money
held by it for the account of a Fund such Fund's pro rata share (based on such
Fund's net asset value at the time of the charge in proportion to the aggregate
net asset value of all Funds at that time) of the amount of such loss, damage,
liability or expense (including counsel fees).
(j) Custodian shall be entitled to rely upon any Officer's
Certificate, Written Instructions, notice or other instrument in writing
received by Custodian and reasonably believed by Custodian to be an Officer's
Certificate or Written Instructions. Custodian shall be entitled to rely upon
any Oral Instructions actually received by Custodian. The Company agrees to
forward to Custodian Written Instructions confirming such Oral Instructions in
such manner so that such Written Instructions are received by Custodian, whether
by hand delivery, telecopier or other similar device, or otherwise, by the close
of business of the same day that such Oral Instructions are received by
Custodian. The Company agrees that the fact that such confirming instructions
are not received, or that contrary instructions are received, by Custodian shall
in no way affect the validity of the transactions or enforceability of the
transactions hereby authorized by the Company. The Company agrees that Custodian
shall not incur any liability to the Company in acting upon Oral Instructions
given to Custodian hereunder concerning such transactions provided such
instructions reasonably appear to have been received from an Authorized Person.
(k) Custodian shall be entitled to rely upon any instrument,
instruction or notice received by it and reasonably believed by it to be given
in accordance with the terms and conditions of any FCM Agreement. Without
limiting the generality of the foregoing, Custodian shall not be under any duty
to inquire into, and Custodian shall not be liable for, the accuracy of any
statements or representations contained in any such instrument or other notice
including, without limitation, any specification of any amount to be paid to a
broker, dealer, futures commission merchant or clearing member.
(l) Custodian shall provide the Company with any report
obtained by Custodian on the system of internal accounting control of the
Book-Entry System, any Securities Depository utilized hereunder the Depository
or the Options Clearing Corporation, and with such reports on its own systems of
internal accounting control as the Company may reasonably request from time to
time.
(m) Subject to the foregoing provisions of this Agreement,
including, without limitation, those contained in Paragraph 27 hereof, Custodian
may deliver and receive securities, and receipts with respect to such
securities, and arrange for payments to be made and received by Custodian in
accordance with the customs prevailing from time to time among brokers or
dealers in such securities. When Custodian is instructed to deliver securities
against payment, delivery of such securities and receipt of payment therefor may
not be completed simultaneously. The Fund assumes all responsibility and
liability for all credit risks involved in connection with Custodian's delivery
of securities pursuant to proper instructions of the Fund, which responsibility
and liability shall continue until final payment in full has been received by
Custodian.
(n) Custodian shall not have any duties or responsibilities
whatsoever except such duties and responsibilities as are specifically set forth
in this Agreement, and no covenant or obligation shall be implied in this
Agreement against Custodian.
23
29. Termination. Any of the parties hereto may terminate this Agreement
by giving to the other parties a notice in writing specifying the date of such
termination, which shall be not less than ninety (90) days after the date of
giving of such notice. Upon the date set forth in such notice this Agreement
shall terminate, and Custodian shall on that date deliver directly to the
Company or a successor custodian designated by the Company all securities and
moneys then owned by the Company and held by Custodian, after deducting all
fees, expenses and other amounts for the payment or reimbursement of which it
shall then be entitled; provided, however, that transaction fees and expenses
payable by the Company in connection with a deconversion to a successor
custodian shall be limited to Custodian's actual direct cost.
30. Notices. All notices and other communications (collectively
referred to as "Notice" or "Notices" in this paragraph) hereunder shall be in
writing or by confirm in telegram, cable, telex, or facsimile sending device.
Notices shall be addressed (a) if to Custodian, at Custodian's address, 00
Xxxxxxxxxx Xxxxxx, (00xx Xxxxx), Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxx
Ajosa; (b) if to the Company, at the address of the Company, 000 Xxxxxx Xxxxxx,
Xxxxxx Xxxx, Xxxxxxxx 00000, Attention: Xxxxxxx X. Xxxxx, Xx., Secretary; or (c)
if to none of the foregoing, at such other address as shall have been notified
to the sender of any such Notice or other communication. Notice shall be deemed
to have been given when actually received by the other party. All postage,
cable, telegram, telex and facsimile sending device charges arising from the
sending of a Notice hereunder shall be paid by the sender.
31. Further Actions. Each party agrees to perform such further
acts and execute such further documents as it deems necessary to effectuate the
purposes hereof.
32. Amendments. This Agreement or any part hereof may be changed
or waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
33. Miscellaneous.
-------------
(a) The Company agrees that Custodian may be a counterparty in
any purchase or sale of foreign currency by or for the Company on a spot or
forward basis, and on any option to buy or sell foreign currency.
(b) This Agreement embodies the entire Agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction or
effect. This Agreement shall be deemed to be a contract made in New York and
governed by New York law. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors.
34. Release. The names "Nations Funds" and "Directors of Nations Funds"
refer respectively to the Company created and the Directors, as Directors but
not individually or personally, acting from time to time under the Articles of
Incorporation of the Company dated
24
December 13, 1983, which is hereby referred to and a copy of which is on file at
the office of the State Secretary of The State of Maryland and at the principal
office of the Company. The obligations of "Nations Funds" entered into in the
name or on behalf thereof by any of the Directors, representatives or agents are
made not individually, but in such capacities, and are not binding upon any of
the Directors, Shareholders, or representatives of the Company personally, but
bind only the Company Property, and all persons dealing with any class of Shares
of the Company Property, and all persons dealing with any class of Shares of the
Company must look solely to the Company Property belonging to such class for the
enforcement of any claims against the Company.
35. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.
THE BANK OF NEW YORK
By: /s/ Xxxxxxx X. Grunston
-----------------------
Xxxxxxx X. Grunston
Vice President
NATIONS FUND, INC.
By: /s/ Xxxxxxx X. Xxxxx, Xx.
-------------------------
Xxxxxxx X. Xxxxx, Xx.
Secretary
25
SCHEDULE I
----------
The Custody Agreement among Nations Fund, Inc. and Custodian applies to
the following funds of the Company:
Nations Prime Fund
Nations Treasury Fund
Nations Equity Income Fund
Nations Small Company Fund
Nations Government Securities Fund
Nations U.S. Government Bond Fund
Last Amended: September 8, 2000
IN WITNESS WHEREOF, the parties hereto have caused this
amended Schedule I to be executed by their duly authorized officers designated
below as of the 8th day of September, 2000.
NATIONS FUND, INC.
By: /s/ Xxxxxxxx X. Xxxxx, Xx.
----------------------------------------
Xxxxxxx X. Xxxxx, Xx.
Secretary
THE BANK OF NEW YORK
By: /s/ Xxxxxxx X. Grunston
----------------------------------------
Xxxxxxx X. Grunston
Vice President
26
SCHEDULE II
-----------
PUBLICATIONS
I, Xxx Xxxxxx, a Vice President with THE BANK OF NEW YORK do hereby
designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
XX Xxxxxx Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
27
SCHEDULE III
------------
COMPENSATION
Domestic Custodian Fee Schedule
For
Nations Fund Inc.
Money Market Funds
Safekeeping/Income Collection/Reporting DTC-ID
Affirmation All Systems Development and Usage Charges
-----------------------------------------------------
1/2 of one basis point per annum on the aggregate net assets of all
Nations' Money Market Funds.
Security Transaction Charges
----------------------------
$ 7 DTC/FRB/PTC
$ 15 Physicals
$ 40 Euro C/D's
Other Charges
-------------
$ 5 Bank official checks
$ 2 Money transfers in/out of the Fund's custodian account not
related to securities transactions.
Earnings Credits on Balances/Interest on Overdrafts
---------------------------------------------------
Earnings credits are provided to each Fund on 80% of the daily balance in the
domestic custodian account computed at the 90-day T-xxxx rate on the day of the
balance.
Overdrafts, excluding bank errors, will cause a reduction of earnings credits
daily, computed at 1% above the average Federal Funds rate on the day of the
overdraft.
Credits and debits will be accumulated daily and offset monthly against the
Bank's domestic custodian fees. To the extent a net debit is accumulated, each
Fund will be billed for the expense. To the extent a net earnings credit is
generated, such excess earnings credit can be carried forward to the next
succeeding month. However, no earnings credit will be carried forward after
year-end.
Out-of-Pocket Expenses
----------------------
None.
Billing Cycle
-------------
The above fees are billed monthly.
Nations Fund Inc. The Bank of New York
----------------- --------------------
Approved by: /s/ Xxxxxxx X. Xxxxx, Xx. Approved by: /s/ Xxxxxxx X. Grunston
------------------------- -----------------------
Title: Secretary Title: Vice President
--------- --------------
Date: 10/20/98 Date: 10/19/98
-------- --------
Domestic Custodian Fee Schedule
For
Nations Fund Inc.
Non-Money Market Funds
Safekeeping/Income Collection/Reporting/DTC-ID Affirmation
All Systems Development and Usage Charges
-----------------------------------------
3/4ths of one basis point per annum on the aggregate net assets of all
Nations' Non-Money Market Funds up to $10 billion.
1/2 of a basis point on the excess.
Security Transaction Charges/Paydowns
-------------------------------------
$ 5 Paydowns
$ 7 DTC/FRB/PTC
$ 15 Physicals, options, and futures
$ 40 Euro C/D's
Other Charges
-------------
$ 5 Bank official checks
$ 2 Money transfer in/out of the Fund's custodian account not
related to securities transactions.
Earnings Credits on Balances/Interest on Overdrafts
---------------------------------------------------
Earnings credits are provided to each Fund on 80% of the daily balance in the
domestic custodian account computed at the 90-day T-xxxx rate on the day of the
balance.
Overdrafts, excluding bank errors, will cause a reduction of earnings credits
daily, computed at 1% above the average Federal Funds rate on the day of the
overdraft.
Credits and debits will be accumulated daily and offset monthly against the
Bank's domestic custodian fees. To the extent a net debit is accumulated, each
Fund will be billed for the expense. To the extent a net earnings credit is
generated, such excess earnings credit can be carried forward to the next
succeeding month. However, no earnings credit will be carried forward after
year-end.
Out-of-Pocket Expenses
----------------------
None.
Billing Cycle
-------------
The above fees are billed monthly.
Nations Fund Inc. The Bank of New York
----------------- --------------------
Approved by: /s/ Xxxxxxx X. Xxxxx, Xx. Approved by: /s/ Xxxxxxx X. Grunston
------------------------- -----------------------
Title: Secretary Title: Vice President
--------- --------------
Date: 10/20/98 Date: 10/19/98
-------- --------
Domestic Custodian Services
---------------------------
Customer Contact
----------------
Portfolio trades are coordinated by a dedicated administrative group
reacting to instructions from your authorized persons.
The group consists of a senior officer in charge, administrators
assigned based on activity and complexity and ample backup on hand to
ensure responsiveness to your needs.
Safekeeping of Securities
-------------------------
We are a direct member of all major depositor systems, i.e., Depository
Trust Company, Federal Reserve Book Entry, Participants Trust Company,
etc.
Agreements are in place with sub-custodians for book-entry municipal
bond programs.
Arrangements have been completed for numerous multi-party repurchase
transactions.
Vault Operations are constantly monitored via closed-circuit security
systems.
Options/Futures
---------------
Issue escrow or depository receipts.
Collect premiums and effect closing purchase transactions for covered
call options.
Issue guarantee letters for put options.
Agreements are in place with numerous Futures Commission Merchants
(FCMs), to settle transactions and service maintenance margin
requirements.
Segregated accounts are maintained to comply with collateral agreements
with contra-brokers.
Income Collection/Paydowns
--------------------------
Dividends and interest due to the account are pre-posted on the payable
date.
Proceeds from maturing securities are credited on the redemption date.
Paydowns on GNMA, FNMA, FHLMC, and CMOs are posted on payable date and
credited in Federal Funds on the business day after payable date when
the factor is available (95% of issues held).
Securities requiring registration are held in our nominee name to
facilitate both sales and income collection.
Reports
-------
The following reports are provided to allow your staff to monitor
portfolio cash and security transactions:
Daily Custodian Account Journal includes portfolio and cash
transactions of the previous business day.
Cash Balance Projection Report includes all trades reported to us that
have not settled through the previous business day. Pending dividends,
interest, maturities and called bonds are also listed on this report.
Daily report of affirmed/unaffirmed trades.
List of Assets reflects securities and cash held in the custodian
account available daily, weekly, monthly, etc.
Monthly Cash Statement - summary of all Daily Custodian Account Journal
activity for the previous month.
Workstation
-----------
Our workstation will afford you the ability to review, edit, enter, and
transmit all trade settlement instructions to the Bank for processing.
Easily accessed via a PC, using a local telephone number, it increases
your flexibility to input and retrieve information while significantly
reducing your communication costs. The system is accessible 24 hours a
day, 7 days a week.
Our Cash Management Report is another of our on-line systems
capabilities providing real-time settlement data regarding the current
day's activity in your account. The activity would include pending and
settled trades, income, paydowns and maturity payments as well as cash
balances. This information puts effective cash management in your
hands.
Another of our dynamic on-line systems is called Q-TRAK. This on-line
module of our system can be used to notify the bank of any inquiries
regarding securities related problems. You can use Q-TRAK to route your
inquiries directly to your Custody Administrative Team. Q-TRAK allows
for prioritization of each inquiry and response,
and permits you to monitor progress on each item as it is being
researched. Many of the Bank's clients have found Q-TRAK to be an
excellent tool in achieving timely resolutions to their questions.
General Servicing
-----------------
Prompt notification of corporate actions.
Corporate literature directly forwarded upon receipt.
Proxies for securities held in our nominee are executed and forwarded
to the Fund for voting.
Payment of your authorized corporate expenses.
SCHEDULE IV
-----------
OVERDRAFT RATE
