CUSTODY AGREEMENT
THIS IS A CUSTODY AGREEMENT, dated this ____ day of March 2001,
between The Chase Manhattan Bank (herein called the "Custodian"), a New York
banking corporation, having its principal place of business in New York, New
York and State Farm Associates' Funds Trust (the "Trust"), a Delaware
business trust and an investment company registered under the Investment
Company Act of 1940, having its principal place of business at Bloomington,
Illinois. The Trust has established separate series of shares, each
corresponding to a separate investment portfolio having its own investment
objective, and may establish additional series of shares in the future. This
agreement shall apply to the funds listed in Exhibit A.
In consideration of the mutual premises and agreements herein
contained, the parties hereto agree as follows:
SECTION 1 DEFINITIONS.
"Agreement" means this Custody Agreement.
"Authorization Letter" or "Letter" means a writing from the Fund
substantially in the form of Exhibit B(1) or B(2) hereto, in respect of
Financial Assets, signed by any of two (2) persons of the Fund authorized to
execute such authorization pursuant to certain corporate resolutions of the
Fund, and instructing the Custodian to take action in respect of the Custody
Account and the Cash Account and such other action incidental thereto and to
the Agreement. Custodian may rely upon a Letter received by facsimile
transmission or Letter in the form of an Electronic Instruction as
hereinafter defined.
"Cash Account" means the cash ledger of the Custody Account to which debits
and credits are made in respect of security transactions and other deposits
to said account and against which no withdrawal may be made by check or draft.
"Custodian" means The Chase Manhattan Bank, a New York banking corporation
and member of the Federal Reserve System.
"Custody Account" means a securities account in the name of the Fund on
Custodian's records to which a Financial Asset is or may be credited pursuant
to this Agreement.
"Depository" means DTC, PTC, and FRBNY and any other depository acceptable to
the Fund.
"DTC" means The Depository Trust Company, a New York limited purpose trust
company.
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"Electronic Instruction" means an electronic instruction received by the
Custodian (i) through DTC's Institutional Delivery System ("IDS") or (ii)
through such other electronic delivery system accessed by password or other
security device and acceptable to the Fund and Custodian for the delivery of
instructions. Fund shall safeguard any testkeys, identification codes or
other security device made available by Custodian to Fund and Custodian may
rely upon any electronic instructions as being authorized by the Fund which
is received using the proper security device.
"Entitlement holder" means the person on the records of a securities
intermediary as the person having a security entitlement against the
securities intermediary.
"Financial Assets" means securities or other investments owned by the Fund.
As the context requires, a Financial Asset means either the interest itself
or the means by which a person's claim to it is evidenced, including a
certificated or uncertificated security, a security certificate, or a
securities entitlement.
"FRBNY" means the Federal Reserve Bank of New York.
"Fund" means the Trust or each series of the Trust to which this agreement
applies.
"Instructions" includes, without limitation, any instructions to sell,
assign, transfer, deliver, purchase or receive for the Custody Account,
Financial Assets or to transfer funds from the Custody Account or a Cash
Account.
"PTC" means Participants Trust Company, a New York limited purpose trust
company.
"Securities" means stocks, bonds, rights, warrants and other negotiable and
non-negotiable paper issued in certificated ("certificated securities") or
book entry form ("uncertificated securities") and commonly traded or dealt in
on securities exchanges or financial markets, and other obligations of an
issuer, or shares, participations and interests in an issuer recognized in an
area in which it is issued or dealt in as a medium for investment and any
other property as shall be acceptable to Custodian for the Custody Account.
"Security entitlement" means the rights and property interest of an
entitlement holder with respect to a financial asset as specified in Part 5
of Article 8 of the Uniform Commercial Code.
"Securities intermediary" means, Custodian, DTC, PTC, the FRBNY, and any
other Depository or financial institution acceptable to the Fund which in the
ordinary course of business maintains securities accounts for others and acts
in that capacity.
"Uniform Commercial Code" means the Uniform Commercial Code of the State of
New York.
SECTION 2 TERMS OF THE CUSTODY.
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SECTION 2.1 CUSTODY ACCOUNT. The parties agree that there shall be a
Custody Account maintained in the name of the Fund with the Custodian, at an
office in New York. The Custody Account shall be entitled as described on
Exhibit C.
SECTION 2.2 APPOINTMENT. The Fund authorizes The Chase Manhattan
Bank to serve as custodian for the Fund, and to act on its behalf solely to
the extent expressly provided herein, or in any Authorization Letter and to
take such other action as may be reasonably incidental thereto. Custodian
shall not use any securities intermediaries other than DTC, PTC and the FRBNY
without Fund's prior written consent.
SECTION 2.3 DUTIES OF THE CUSTODIAN. It is the expressed
understanding of the parties that:
SECTION 2.3.1 ACCEPT, DELIVER AND EXCHANGE SECURITIES. Upon receipt
of and pursuant to an Authorization Letter, oral notice (hereinafter
"Notice,") from the Fund (such Notice to be followed by written confirmation
in the form of an Authorization Letter), or Electronic Instructions, the
Custodian shall accept and deliver Financial Assets for the Fund. From time
to time, pursuant to a Letter, Notice, such Notice to be followed by the
Fund's written confirmation thereof, or Electronic Instructions, the
Custodian shall exercise or dispose of subscriptions, rights and warrants of
any Financial Assets held in the Custody Account or to be received by the
Custodian for deposit to the Custody Account. In respect of a Notice, in the
event that the written confirmation has not been received prior to the time
requested action must take place, the Custodian may rely upon the Notice
provided that, the Custodian has been able to orally confirm such instruction
with such other persons as the Fund shall designate from time to time in
writing to the Custodian as authorized to make such confirmations. Except as
otherwise advised in a Letter, Notice, or by Electronic Instructions, in
delivering Financial Assets, the Custodian shall do so only against payment,
or upon the receipt of other Financial Assets.
SECTION 2.3.2 PURCHASE OF SECURITIES. Upon receipt of a Letter,
Notice from the Fund (such Notice to be followed by written confirmation in
the form of an Authorization Letter), or Electronic Instruction, the
Custodian shall purchase for the Fund such Financial Assets in the amounts
and maturing on the dates therein described and charge the payment for such
purchases to the Cash Account. In the event that the written confirmation has
not been received prior to the time requested action must take place, the
Custodian may rely upon the Notice, provided that the Custodian has been able
to orally confirm such instruction with such other persons as the Fund shall
designate from time to time in writing to the Custodian as authorized to make
such confirmations. Unless and until otherwise instructed by the Fund
pursuant to the terms herein contained, the Custodian shall deposit any and
all Financial Assets purchased hereunder into the Fund's Custody Account as
soon as reasonably feasible following its receipt thereof. Except as
otherwise advised in a Letter, Notice, or by Electronic Instructions, the
Custodian shall make payment for Financial Assets purchased only at the time
of delivery of such Financial Assets to the Custodian.
March 2001 3 of 17
SECTION 2.3.3 PAYMENT OF MONIES. From time to time, the Custodian
shall upon its receipt of a Letter or Notice, such Notice to be followed by
written confirmation in the form of a Transfer Letter (as used herein the
term "Transfer Letter" shall mean the Fund's transfer letter, substantially
in the form of Exhibit D attached hereto) or Electronic Instruction, transfer
monies from the Custody Account; PROVIDED THAT: the Custodian complies with
the requirements of The Chase Manhattan Bank Funds Transfer Service Security
Procedure Agreement (Exhibit E).
From time to time, the Fund shall notify Custodian of deposits for
its accounts. Upon receipt of funds identifying the Fund by account number as
beneficiary, the Custodian shall credit such funds to the account identified
and notify the Fund.
SECTION 2.3.4 SALE OF SECURITIES. Upon the receipt of a Letter,
Notice (such Notice to be followed by written confirmation in the form of a
Letter), or Electronic Instruction, the Custodian shall use its reasonable
best efforts, subject to the terms and conditions herein contained, to
present for sale in the amount and on the dates therein stated such Financial
Assets of the Fund as therein described, and held in the Custody Account and
cause the proceeds generated by such sale(s), to be deposited into the Cash
Account. In the event that the written confirmation has not been received
prior to the time the requested action must take place, the Custodian may
rely upon the Notice, provided that the Custodian has been able to orally
confirm such instruction with such other persons as the Fund shall designate
from time to time in writing to the Custodian as authorized to make such
confirmations.
In the event that it shall be impracticable for the Custodian, in
accordance with such Letter, Notice, or Electronic Instruction, to present
for sale Financial Assets on the dates specified, the Custodian shall as soon
as it learns of any such impracticability, notify the Fund via telephone.
Unless the Custodian shall have received from the Fund a Letter,
Notice, or Electronic Instruction to the contrary, the Custodian shall
deliver the Financial Assets to a broker, a dealer or other purchaser
identified in the instruction against payment. It is understood by the Fund
that delivery against payment in the securities markets means delivery
against a receipt or other evidence that a payment is due later but before
the end of the same business day. The Custodian shall have no liability with
respect to the non-receipt of payment arising from:
i) Any insolvency of any broker, dealer or other purchaser which occurs
after delivery of the Financial Assets by Custodian but before payment
is received by Custodian; or
ii) Insolvency of any issuer of the Financial Assets ; or
iii) Any act or omission of any broker, attorney, custodian, escrowee, or
similar agent designated by Fund to perform any act with respect to
the Financial Assets.
This Section shall not be interpreted to relieve or to lessen the standard of
care the Custodian is required to use by other terms of this Agreement.
March 2001 4 of 17
SECTION 2.3.5 REGISTERED SECURITIES. Except as otherwise set forth
in this Section 2.3.5, the Custodian shall register any registerable
Financial Assets held and maintained in a Custody Account in Custodian's
nominee name or that of an affiliate or Depository. Private placements and
other types of Financial Assets which the Fund from time to time identifies
shall be registered in the name of the Fund. All taxes or other expenses
incidental to any transfer to or from the name of a nominee shall be borne by
the Fund.
SECTION 2.3.6 CALLS FOR PAYMENT. The Custodian shall use its
reasonable best efforts to determine from financial information services to
which it subscribes, or such other financial services as agreed to by the
parties, when Financial Assets held in the Custody Account are called for
payment and surrender for payment any Financial Assets or notes which have
matured or with respect to which it received or knows of a notice to call.
SECTION 2.3.7 NOTICES, ADVICE, ETC. The Custodian shall use its
reasonable best efforts to:
(a) promptly notify the Fund of any unpaid principal amounts, or
any unpaid amounts of interest accrued and owing, or payable
on any Financial Assets held or maintained in a Custody
Account of which Custodian is aware;
(b) forward to the Fund as of the close of business each business
day (electronically or by mail) advices of the Financial
Assets and cash transactions in a Custody Account;
(c) deliver to the Fund, promptly upon receipt of the Fund's
request, a schedule of the Financial Assets held and
maintained in a Custody Account;
(d) promptly notify the Fund of any legal action of which the
Custodian's corporate actions unit becomes aware with respect
to any Financial Assets held and maintained in a Custody
Account;
(e) promptly notify the Fund of any subscriptions, warrants or
like rights it may have of which the Custodian's corporate
action unit becomes aware;
(f) promptly notify the Fund of any invitations to tender a
Financial Asset, held and maintained in a Custody Account
of which the Custodian's corporate action unit becomes aware;
and
(g) deliver to the Fund all printed material received by the
Custodian's corporate actions unit and requiring some action
by the Fund pertaining to any Financial Assets held or
maintained in a Custody Account.
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SECTION 2.3.8 STOCK DIVIDENDS, ETC. Financial Assets delivered to
the Custodian as stock dividends, stock splits or as a result of the exercise
of rights, shall be deposited into and held and maintained in the Custody
Account of the Fund and treated in like manner as all other Financial Assets
therein held and maintained.
SECTION 2.3.9 FRACTIONAL SHARES. In the event that an issuer of a
Financial Asset held by the Custodian in the Custody Account shall declare a
dividend payable in stock, and such dividend results in a fractional share of
stock being issued, the Custodian, without prior notice to or from the Fund,
shall sell such fractional share(s) and deposit the proceeds received from
such sale into the Custody Account. The Custodian shall notify the Fund of
such sale thereafter.
SECTION 2.3.10 COLLECTION OF INCOME AND PRINCIPAL. The Custodian
shall from time to time take necessary action(s) to collect dividends,
interest payments, payments made on account of called and matured Financial
Assets, and any other payments with respect to such Financial Assets
deposited into or held or maintained in the Custody Account, when such
payments shall become owing; provided that so long as Custodian's actions are
in compliance with the standard of care set forth in Section 7.17, Custodian
shall not be responsible for failure to receive payment of (or late payment
of) distributions with respect to Financial Assets or other property held in
the Custody Account. Upon receipt of such funds collected hereunder,
Custodian will use its best efforts to deposit such collected funds into the
Custody Account on the same business day upon which such collected funds are
received by the Custodian. Accordingly, in making collections of income or
principal hereunder, the Custodian may to the extent necessary or required by
any applicable law of any sovereign body, including the United States, or a
State, and solely to such extent, execute on behalf of the Fund certificates
or other like documents. All cash shall be held and maintained in the Custody
Account subject to further instruction from the Fund. In the event the
Custody Account is credited by the Custodian in anticipation of the
Custodian's collection of monies, and the Custodian is unable to collect such
monies, the Fund agrees that it shall promptly upon telephonic notice from
the Custodian, return an amount equal to the amount so credited and not
collected to the Custodian in immediately available funds.
SECTION 2.3.11 EXCHANGE CERTIFICATES. The Custodian shall exchange
temporary for definitive certificates or effect mandatory exchanges of
certificates.
SECTION 2.3.12 BOOKS AND RECORDS. Custodian shall at all times
maintain proper books and records that shall identify the Fund as the
entitlement holder of such Financial Assets and the location of the Financial
Assets.
The Custodian shall with respect to the Fund create and maintain all
records relating to its activities and obligations under this Contract. All
such records shall upon reasonable notice and during the regular business
hours of the Custodian be open for inspection by duly authorized officers,
employees or agents of the Fund, including the Fund's independent public
accountant, and employees and agents of the United States Securities and
Exchange Commission. The Custodian shall, at the Fund's request, supply the
Fund with a tabulation of securities owned by
March 2001 6 of 17
the Fund and held by the Custodian and shall, when requested to do so by the
Fund and for such compensation as shall be agreed upon between the Fund and
the Custodian, include certificate numbers in such tabulations.
The Custodian shall cooperate with and supply reasonable and
customary information regarding the Custody Account to the entity or entities
appointed by the Board of Directors of the Fund to keep the books of account
of the Fund.
Unless Fund shall send to Custodian a written exception or objection
to any statement of account within 90 days of its receipt of such statement
from Custodian, Fund shall be deemed to have approved such statement.
SECTION 2.3.13 CERTIFICATE OF THE BANK. The Custodian shall:
(a) deliver to the Fund on or before January 31st of each
calendar year, a certified schedule, dated December 31, of
the preceding calendar year, executed by two duly elected
and authorized officers of Custodian setting forth a full
description of the Financial Assets held and maintained in
each Custody Account, including, but not limited to, among
other things, the par value of each bond and the number of
shares for each stock or the equivalent, as the case may be,
as of the close of business on December 31st, of each
calendar year;
(b) use its best efforts to deliver to the Fund, within five (5)
business days after the receipt of the written request of the
Fund a certified schedule, dated the date of its issue,
executed by two duly elected and authorized officers of
Custodian, setting forth a full description of the Financial
Assets held and maintained in the Custody Accounts, including
among other things, the par value of each bond and the number
of shares for each stock or the equivalent, as the case may
be; and
(c) deliver, following a request by the Fund, to any governmental
agency certified by the Fund to the Custodian and, in a
timely manner, a certified schedule, which schedule, to the
extent possible, shall be substantially in the form of the
certified schedule to be delivered pursuant to the preceding
clause (b) of this subsection.
In the event the Custodian is unable to deliver, pursuant to clause
(c) above, the certified schedule therein described, the Custodian shall,
immediately upon learning of such inability, notify the Fund by telephone and
promptly confirm such notice to the Fund in writing. Such written notice to
the Fund shall set forth (i) an explanation as to the Custodian's inability
to deliver such certified schedule and (ii) the date upon which such
certified schedule shall be delivered.
SECTION 2.3.14 OTHER SECURITIES. Upon receipt of an Authorization
Letter or Electronic Instruction, the Custodian is authorized to take any and
all actions necessary to settle
March 2001 7 of 17
transactions in futures and/or options contracts.
SECTION 2.4 LOTTERY. In the event Financial Assets held in the
Custody Account at a Securities Depository are called for partial redemption
by the issuer, the Custodian will, in its reasonable discretion, allocate the
called portion to the respective holders in a manner which is fair,
equitable, and in accordance with its established procedures.
SECTION 2.5 CONVERSION. The Custodian shall, except where instructed
otherwise by the Fund, convert monies received by the Custodian with respect
to Financial Assets maintained in the Custody Account of foreign issue into
United States dollars at prevailing rates. In effecting such conversion, the
Custodian may use any commercially reasonable method or agency available to
it, including the facilities of its own divisions or affiliates. The Fund
agrees that it shall bear all risk and reasonable expense of such conversion,
including without limitation, losses arising from fluctuations in the
exchange rate provided that the Custodian has acted in good faith and in
accordance with the commercial standard of care for Money Center banks which
offer custodial services.
SECTION 2.6 MAINTAIN DUPLICATE RECORDS. The Custodian shall store
"off-premises" tapes of daily transactions with respect to the Custody
Account. Such tapes shall be maintained in accordance with the Custodian's
practice in effect from time to time.
SECTION 2.7 SETTLEMENT. The Fund intends to have sufficient
immediately available funds each day in the Custody Account to pay for the
settlement of all Financial Assets delivered against payment to Custodian or
its agents and credited to the Custody Account. Should Fund fail to have
sufficient immediately available funds in a Custody Account to settle
deliveries of Financial Assets pursuant to Section 2.3.2 (a "Deficit"),
Custodian may elect (i) to reject the settlement of any or all of the
Financial Assets delivered to it that day to a Custody Account but only after
notice to Fund, (ii) to settle the deliveries on the Fund's behalf and debit
the Custody Account of the Fund for the amount of such Deficit , or (iii) to
reverse the posting of the Financial Assets credited to the Custody Account,
but only after notice to the Fund.
No prior action or course of dealing on the part of Custodian with
respect to the settlement of Financial Assets transactions on Fund's behalf
shall be used by or give rise to any claim or action by Fund against
Custodian for its refusal to pay or settle for a securities transaction that
has not been timely funded as required herein.
SECTION 2.8 SECURITY INTEREST. To the extent Custodian has advanced
funds on Fund's behalf in connection with the settlement of purchases and
sales of Financial Assets for the Custody Account, Custodian shall have a
security interest in the Financial Assets which are the subject of such
purchases and sales until Fund shall have repaid the amount of such advance
to Custodian, and Custodian's security interest in such Financial Assets
shall be released upon Fund's repayment of such advance to Custodian.
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SECTION 3 SAFEKEEPING OF FINANCIAL ASSETS.
SECTION 3.1 SAFEKEEPING. The Custodian shall hold all Financial
Assets held in the Custody Account in its vault and physically segregate for
the account of the Fund all Financial Assets held by it, except those
Financial Assets which are book-entry securities maintained on the Federal
Reserve Book-Entry Account System or which are eligible for deposit with a
Depository. Unless specified in the Authorization Letter to the contrary, it
is understood that, eligible Financial Assets will be maintained with a
Depository. The Custodian shall be responsible for all Financial Assets
deposited into and held and maintained in the Custody Account whether the
Financial Assets be in the physical custody of the Custodian or held by the
Custodian through a Depository; PROVIDED that the Custodian shall not be
responsible for loss or destruction of Securities held and maintained in the
Custody Account, where such loss or destruction is caused by earthquake,
volcanic eruptions or such like disturbances of nature, by reason of war,
whether declared or undeclared; or caused by the lawful act of any executive,
legislative, judicial, administrative or other governmental or military body
or officer. Custodian shall be obligated to indemnify Fund for any loss of
Financial Assets received for, and credited to the Custody Account resulting
from (i) the negligence or willful misconduct of Custodian or its officers,
employees or agents (excluding any Depository retained for such Financial
Assets) or (ii) the burglary, robbery, hold-up, theft or mysterious
disappearance, including loss by damage or destruction. In the event of a
loss of Financial Assets for which it is required to indemnify Fund pursuant
to the immediately preceding sentence, Custodian shall promptly replace such
Financial Assets (by among other means posting appropriate security or bond
with the issuer(s) of such Financial Assets and obtaining their reissue) or
if agreed to by Fund and Custodian, Custodian shall replace the value thereof
(determined based upon the market value of the Financial Assets which are the
subject of such loss as of the date of the discovery of such loss or as of
the date of replacement) and the value of any loss of rights or privileges
resulting from the loss of such Financial Assets. The foregoing indemnity
shall be the exclusive liability of Custodian to Fund for its loss of
Financial Assets held for the Custody Account.
Custodian shall be responsible for only those duties expressly
stated in this Agreement or expressly contained in instructions to perform
the services described herein given to Custodian pursuant to the provisions
of this Agreement and accepted by Custodian but, without limiting the
foregoing, Custodian and its agents shall have no duty or responsibility;
(a) to supervise the investment of, or make recommendations
with respect to the purchase, retention or sale of, Financial Assets
relating to the Custody Account, or to maintain any insurance on
Financial Assets in the Custody Account for Fund's benefit;
(b) with regard to any Financial Assets in the Custody
Account as to which a default in the payment of principal or interest
has occurred, to take any action other than giving of notice with
respect to such default; except, in each instance, where Custodian has
been requested by Fund and Custodian has agreed in writing to do so;
March 2001 9 of 17
(c) to evaluate, or report to Fund regarding, the financial
condition of any person, firm or corporation to which Custodian is
instructed to deliver Financial Assets or funds pursuant to this
Agreement;
(d) for any loss occasioned by delay in the actual receipt of
notice by Custodian of any payment, redemption or other transaction in
respect to which Custodian is authorized to take some action pursuant
to this Agreement; or
(e) for any errors or omissions made by any securities
pricing services used by Custodian to value Financial Assets credited
to the Custody Account as part of any service subscribed to by Fund
from Custodian.
SECTION 3.2 USE OF A DEPOSITORY. The Custodian shall:
(a) upon the delivery or transfer, by book-entry or otherwise, of
any of the Fund's Financial Assets to a Securities Depository
Account as provided herein, identify in its records the
Financial Assets as held for the Fund in the Custody
Agreement;
(b) at all times retain against the Depository any and all rights
provided the Custodian, whether such rights be provided by
applicable law, governmental rules or regulations, rules and
regulations of the Depository, or otherwise, including but not
limited to, the right to recover from the Depository (for the
benefit of the Fund) for any loss or losses on the part of the
Depository;
(c) from time to time, as the need may arise, to enforce, for the
benefit of the Fund, any and all rights provided the
Custodian, whether such rights be provided by applicable law,
governmental rules or regulations or otherwise, against the
Depository pertaining to any Financial Assets which are the
property of the Custody Account and are deposited by the
Custodian with the Depository;
(d) within ten (10) business days after its receipt of a request
from the Fund, deliver to the Fund the most current report
issued by the Depository pertaining to its system of internal
accounting control; and
(e) make payment for securities purchased and sold through the
clearing medium employed by such Depository for transactions
of participants acting through it. Upon any purchase of
securities, payment will be made only upon delivery of the
securities to or for the account of the Fund; and upon any
sale of securities, delivery of the securities will be made
only against payment therefor.
SECTION 3.3 THE DEPOSITORY ACCOUNT. The Depository account maintained
by the Custodian and receiving Financial Assets which have been recorded by the
Custodian as held for the Custody Account, shall hold only Financial Assets in
which the Custodian has interest only in a fiduciary or agency capacity for
clients and the Financial Assets in such account will not be
March 2001 10 of 17
commingled with the Custodian's own Financial Assets.
SECTION 3.4 CERTAIN CONDITIONS. Any Financial Assets held by the
Custodian for the benefit of the Fund pursuant hereto (including those
Financial Assets held in a Depository) shall be considered by the parties
hereto, and shall be at all times, the sole, absolute property of the Fund,
and for purposes of this Agreement, shall be considered part of the Financial
Assets held and maintained in the Custody Account.
SECTION 3.5 SEGREGATED ACCOUNT. The Custodian shall upon receipt of
Instructions from the Fund establish and maintain a segregated account or
accounts for and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities (including securities maintained in an
account by the Custodian pursuant to Section 3.2. hereof):
(a) in accordance with the provisions of any agreement among
the Fund, the Custodian and a broker-dealer registered under
the Securities Exchange Act of 1934 and a member of the NASD
(or any futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any
registered national securities exchange (or the Commodity
Futures Trading Commission or any registered contract
market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by the Fund,
(b) for purposes of segregating cash or government securities in
connection with options purchased, sold or written by the Fund
or commodity futures contracts or options thereon purchased or
sold by the Fund,
(c) for the purposes of compliance by the Fund with the procedures
required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of segregated accounts
by registered investment companies, and
(d) for other proper corporate purposes.
SECTION 4 PUT OPTIONS. Notwithstanding any provision hereunder to
the contrary, with respect to Financial Assets which possess so-called put
options or similar characteristics which grant the Fund the option to redeem
such Financial Assets prior to their maturity date ("Put Options Securities")
including, but not limited to so-called put bonds, the following shall apply:
(a) with respect to put options which are exercisable
semi-annually, or less frequently than semi-annually, and
where such Put Option Financial Assets is actually delivered
to the Custodian not less than fifteen (15) business days
prior to the put option exercise date, the Custodian shall
use its reasonable best efforts to notify the Fund of such
put option, where correct and timely notification is
published in
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the publications or services ("Notification Sources") the
Custodian routinely uses for this purpose, or as to which
the Custodian receives timely notice from the Fund;
(b) once notified, the Fund must direct the exercise or
non-exercise of such put option by Letter delivered to the
Custodian not less than five (5) business days prior to the
put option exercise date, and if the Fund fails to make such
direction, the Custodian shall not exercise such put option;
and
(c) for purposes of this Section 3: a "business day" is a day on
which the Custodian is open for business under the laws of
the State of New York; the notification sources include, but
are not limited to, X.X. Xxxxxx, THE WALL STREET JOURNAL
and/or DTC, and the Custodian reserves the right to utilize
commercially acceptable other notification sources or
discontinue any of the aforementioned notification sources
at any time and without notice; and
(d) the Custodian shall not notify the Fund of put options
exercisable more frequently than semi-annually.
SECTION 5 BULK HOLDING. The Custodian may hold the Financial Assets
of the Fund in its own vault, separate from its own Financial Assets in bulk
with Financial Assets of the same class and the same issue of other of its
own fiduciary and agency customers; PROVIDED THAT: the Financial Assets in
such bulk shall be adequately identified as belonging to the Fund on the
records of the Custodian.
SECTION 6 THE CUSTODIAN. The Fund and the Custodian agree that the
Custodian in carrying out the provisions of this Agreement, including but not
limited to the purchase of any Financial Assets for deposit into, or the
selling or delivering of any Financial Assets held and maintained in, the
Custody Account, is acting solely as the agent of the Fund. Unless the
Custodian shall otherwise agree in writing, the Custodian shall not have the
duty to take any action other than those actions expressly set forth herein
or those actions necessary and advisable to accomplish such expressly set
forth actions. The Custodian is hereby expressly authorized to execute in the
name of the Fund such certificates as may be necessary to obtain payment with
respect to, or to effect the sale, transfer or other disposition of any
Financial Assets held in the Custody Account in accordance with the Fund's
instructions. In carrying out the purchase or sale of any Financial Assets
hereunder, the Custodian may, upon receipt of the Fund's instructions,
purchase from or sell to the Custodian's bond department or an affiliate of
the Custodian.
SECTION 7 GENERAL.
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SECTION 7.1 WAIVER; AMENDMENTS. Except as otherwise provided in Section
2.3.12, no delay on the part of the Fund or the Custodian in the exercise of any
right, power or remedy shall operate as a waiver thereof, nor shall any single
or partial exercise by the Fund or the Custodian of any right, power or remedy
preclude other or further exercise thereof, or the
March 2001 12 of 17
exercise of any other right, power or remedy. No amendment, modification or
waiver of, or consent with respect to, any provision of this Agreement, shall
in any event be effective unless the same shall be in writing and signed and
delivered by each of the Custodian and the Fund.
SECTION 7.2 NOTICE. Notices with respect to termination, any
disputes hereunder, specification of authorized officers and employees, and
terms and conditions for instructions required hereunder, shall be in
writing, and shall be deemed to have been duly given if delivered personally,
by courier service or by mail, postage prepaid, to the following addresses
(or to such other address as either party hereto may from time to time
designate by notice duly given in accordance with this paragraph):
To the Fund at:
State Farm Associates' FundsTrust
Three Xxxxx Xxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
To Custodian, to the attention of the individual designated by
Custodian as the safekeeping account administrator for Fund's account, at:
The Chase Manhattan Bank
North American Insurance Securities Services
3 Chase XxxxxXxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
SECTION 7.3 COMPUTATIONS. Where the character or amount of any asset
or liability or item of income or expense is required to be determined, or
any consolidation or other accounting computation is required to be made, for
the purpose of this Agreement, such determination or calculation shall, to
the extent applicable, be made in accordance with generally accepted
accounting principles.
SECTION 7.4 HEADINGS. Section headings used in this Agreement are
for convenience only, and shall not effect the construction of this Agreement.
SECTION 7.5 GOVERNING LAW. This Agreement shall be a contract made
under and governed by the internal laws of the State of New York including
the Uniform Commercial Code.
SECTION 7.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the Fund and the Custodian individually and each of their respective
successors and assigns, and shall inure to the benefit of the Fund and the
Custodian and the respective successors and assigns of the Fund and the
Custodian; PROVIDED that, the Custodian may not assign or transfer this
Agreement or delegate any of its duties hereunder except as permitted herein,
without the prior
March 2001 13 of 17
written consent of the Fund.
SECTION 7.7 INTEGRATION; COURSE OF DEALING. This Agreement
constitutes the sole agreement of the parties with respect to the subject
matter hereof and supersedes all oral negotiations and prior writings with
respect to the subject matter hereof.
SECTION 7.8 TERMINATION. This Agreement shall terminate 90 days
after the receipt by the Custodian or the Fund, or such mutually agreed date
as the case may be, of written notice from the Custodian or the Fund
terminating this Agreement.
SECTION 7.9 CERTAIN NOTICES BY THE FUND AND THE CUSTODIAN. The Fund
agrees to promptly notify the Custodian of any material change in its
organization or any reorganization by it. The Custodian shall notify the Fund
of any changes in its organization which affect its ability to do business as
a banking corporation.
SECTION 7.10 CERTAIN REPRESENTATIONS BY THE FUND AND THE CUSTODIAN.
(a) The Fund herewith promises to the Custodian that (i) all instructions and
confirmations given hereunder shall be given and are given pursuant to
authorizations contained or to be contained in resolutions of its Board of
Directors and by persons authorized by such resolutions to give the same, and
(ii) it shall from time to time furnish the Custodian with certified copies
of such resolutions upon which it may rely for the authorizations contained
therein until otherwise notified in writing of a change thereto. (b) The
Custodian herewith promises to the Fund that (i) it has the full power and
authority to perform its obligations hereunder, (ii) this Agreement
constitutes its legal, valid and binding obligation enforceable in accordance
with its terms and (iii) it has taken all necessary action to authorize the
execution and delivery hereof.
SECTION 7.11 TAXPAYER IDENTIFICATION NUMBER. The taxpayer
identification numbers of the Funds are listed in Exhibit A. Unless Fund has
already done so, as a U.S. citizen or resident, it shall deliver promptly to
Custodian with respect to the Custody Account established under this
Agreement, two duly completed and executed copies of United States Internal
Revenue Service form W-9 for the Fund. Fund shall provide duly executed and
completed updates of such form after the occurrence of an event requiring a
change in the form previously delivered by Fund to Custodian. The Fund shall
be responsible for the payment of all taxes relating to the Financial Assets
in the Custody Account.
SECTION 7.12 EXPENSES AND TAXES. The Fund agrees to pay, and to save
the Custodian harmless from all liability, for any taxes which may be payable
in connection with the Financial Assets and any proceeds generated by
Financial Assets and any other property of the Fund purchased or held and
maintained hereunder. All obligations provided for in this subsection 7.12,
and in subsection 7.13 hereof, shall survive any termination of this
Agreement.
SECTION 7.13 FEES. For and in consideration of the Custodian acting
as the custodian and the agent of the Fund pursuant to the terms herein
contained, the Fund agrees to pay to the
March 2001 14 of 17
Custodian fees for such services as mutually agreed upon by the parties
hereto and as set forth in Exhibit F hereto. Such agreed upon fees may from
time to time be modified by the Custodian pursuant to its notice to the Fund
effective no less than 90 days following the Fund's receipt of such notice.
To the extent that Custodian advances funds to the Custody Account for
disbursements or to effect the settlement of purchase transactions, the
Custodian shall be entitled to collect from the Custody Account an amount
equal to The Chase Manhattan Bank's Prime Rate in effect as announced by it
from time to time, unless the Fund and Custodian have agreed in writing to
another interest rate.
SECTION 7.14 HOLD HARMLESS. The Fund agrees to indemnify and hold
the Custodian harmless from and against all claims, losses, liabilities and
expenses, including without limitation, reasonable legal fees and expenses,
arising from any claim of any party arising or resulting from actions the
Custodian takes that are required by this Agreement; provided that the
Custodian shall have acted in good faith and in accordance with the
commercial standard of care for Money Center banks which offer custodial
services.
SECTION 7.15 FORCE MAJEURE. Neither the Custodian nor the Fund shall
be responsible for its failure to carry out its responsibilities hereunder
where such failure is caused by circumstances reasonably beyond the control
of the parties so affected including but not limited to, acts of God, war,
internal strife and acts of government.
SECTION 7.16 DISCLAIMER OF LIABILITY. UNDER NO CIRCUMSTANCES
WHATSOEVER SHALL EITHER PARTY BE RESPONSIBLE TO THE OTHER PARTY FOR ANY
INCIDENTAL, SPECIAL, CONSEQUENTIAL, OR INDIRECT DAMAGES OF ANY KIND
WHATSOEVER, PROVIDED THE PARTY AGAINST WHOM THE DAMAGES ARE CLAIMED HAS NOT
ACTED IN BAD FAITH OR ENGAGED IN WILLFUL MISCONDUCT; AND, PROVIDED FURTHER,
THAT ANY INDEMNITY CLAIM BY THE CUSTODIAN UNDER SECTION 7.14 SHALL CONSTITUTE
A DIRECT DAMAGES CLAIM AND SHALL NOT BE SUBJECT TO THE LIMITATION SET FORTH
HEREIN.
SECTION 7.17 STANDARD OF CARE. The Custodian expressly agrees that
in carrying out its responsibilities hereunder it shall be responsible for
damages, except as limited by Section 3.1, the Fund suffers as a result of
Custodian's, its employees' and agents' negligence, willful misconduct or
failure to act in good faith and in accordance with the commercial standard
of care for Money Center banks which offer custodial services. The Custodian
shall not be responsible for the title, validity or genuineness of any
property or evidence of title thereto received by it or delivered by it
pursuant to this Agreement. The Custodian shall be held harmless in acting
upon any Letter, Notice, request, direction, instruction, consent,
certification or other instrument believed by it, acting in good faith, to be
genuine and delivered by an authorized officer of Fund.
SECTION 7.18 EXHIBITS. The parties agree that any exhibits attached
hereto may be modified effective upon written notice from the Fund to the
Custodian. Any such modified
March 2001 15 of 17
exhibit shall be and is hereby deemed to be the exhibit (indicated in such
written notice) to this Agreement.
SECTION 7.19 NONDISCLOSURE, CONFIDENTIALITY. The Custodian expressly
agrees that it shall not use the name of, nor identify, the Fund or any of
its subsidiaries in any of the Custodian's media or other advertising
distributed by the Custodian to its customers or potential customers.
The Custodian shall maintain the confidentiality of the Fund's
Custody Account information and not disclose any such information except as
permitted by this Agreement or as required by laws, rules, regulations or
orders having the force of law, but only after notice to Fund.
The Shareholders Communications Act of 1985 and subsequent
amendments to the act authorize Custodian to release to issuers of Securities
and to other security holders of an issue, Fund name, address and Securities
position if Fund Custody Account was opened after December 28, 1985, unless
Fund states its objection. Custodian hereby acknowledges Fund's objection.
SECTION 7.20 "FREE RIDING" PROHIBITION. Fund hereby acknowledges
that the act of placing a buy order and sale order for the same securities
which are to settle on the same date in instances where Fund does not have in
the Custody Account sufficient funds independent of the sale of such
securities to satisfy fifty percent (50%) or more of the purchase price (or
such other percentage as may be required by applicable law and regulation)
constitutes the practice commonly known as "free riding" and is prohibited
under both Regulation T and Regulation U of the Board of Governors of the
Federal Reserve System (12 C.F.R. Parts 220 and 221).
SECTION 7.21 FUND RESPONSIBILITY. Fund agrees that it shall be
responsible to Custodian as a principal for all of its obligations to
Custodian arising under or in connection with this Agreement, and Fund
warrants its authority to deposit in the Custody Account any Financial Assets
and funds which Custodian receives therefor and to give instructions relative
thereto. Fund further agrees that Custodian shall not be subject to, nor
shall its right and obligations with respect to this Agreement and the
Custody Account be affected by, any agreement between Fund and any such
person.
SECTION 7.22 BINDING OBLIGATION AND LIMITATION OF LIABILITY. It is
expressly understood that the obligations of the Fund under this Agreement
will not be binding on any of the Directors, shareholders, nominees,
officers, agents or employees of the Fund personally, but bind only the
assets and property of the Fund.
Custodian agrees that no Director, shareholder, nominee, officer,
agent or employee of the Fund may be held personally liable or responsible
for any obligations of the Fund arising out of this Agreement.
March 2001 16 of 17
SECTION 7.23 RESERVATION OF RIGHT. Custodian shall have the right
not to accept for deposit to the Custody Account any Financial Assets which
are in a form or condition which Custodian, in its sole discretion,
determines not to be suitable for the services Custodian provides under this
Agreement.
Custodian's and Fund's rights and remedies under this Agreement are
in addition to, and not in limitation of, any other rights and remedies
available to Custodian and Fund under applicable law.
SECTION 7.24 CUSTODIAN'S ANNUAL REPORT. Upon the Fund's request,
Custodian will send the annual report (SAS 70 Report) prepared by its
external auditors on its systems of internal accounting control of custodied
Financial Assets. In addition, the Custodian shall allow the Fund's
independent public accountant reasonable access to the records of the
Custodian relating to the Financial Assets as is required in connection with
their examination of books and records pertaining to the Fund's affairs.
SECTION 7.25. SEVERAL OBLIGATIONS OF THE PORTFOLIOS. This Agreement is an
agreement entered into between the Custodian and the Trust with respect to
each portfolio listed in Exhibit A. With respect to any obligation of the
Trust on behalf of any portfolio arising out of this Agreement, the Custodian
shall look for payment or satisfaction of such obligation solely to the
assets of the portfolio to which such obligation relates as though the
Custodian had separately contracted with the Trust by separate written
instrument with respect to each portfolio.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers effective as of the
day and year first written above.
State Farm Associates' Funds Trust
By: ______________________________
Name: Xxxxxx X. Xxxx, Xx.
Title: President
The Chase Manhattan Bank
By: ______________________________
Name: Xxxxx X. Xxxxxx
Title: Vice President
March 2001 17 of 17
Exhibit A
Trust Portfolios Included in this Agreement and
Corresponding Taxpayer Identification Number
State Farm Growth Fund [ ]
State Farm Balanced Fund [ ]
State Farm Interim Fund [ ]
State Farm Municipal Bond Fund [ ]
March 2001 18 of 17
Exhibit C
State Farm Associates' Funds Trust
Custody Accounts at Chase Manhattan Bank
ACCOUNT
NUMBER
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State Farm Growth Fund [ ]
State Farm Balanced Fund [ ]
State Farm Interim Fund [ ]
State Farm Municipal Bond Fund [ ]
March 2001 19 of 17
