1
CUSTODIAN AGREEMENT
between
UBS PRIVATE INVESTOR FUNDS, INC.
and
INVESTORS BANK & TRUST COMPANY
PAGE 1
TABLE OF CONTENTS
Page
1. Bank Appointed Custodian . . . . . . . . . . . . . . . . 1
2. Definitions . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Authorized Person . . . . . . . . . . . . . . . . . 1
2.2 Board . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Security . . . . . . . . . . . . . . . . . . . . . . 1
2.4 Portfolio Security . . . . . . . . . . . . . . . . . 2
2.5 Officers' Certificate . . . . . . . . . . . . . . . 2
2.6 Book-Entry System . . . . . . . . . . . . . . . . . 2
2.7 Depository . . . . . . . . . . . . . . . . . . . . . 2
2.8 Proper Instructions . . . . . . . . . . . . . . . . 2
2.9 Foreign Securities . . . . . . . . . . . . . . . . . 3
2.10 Series . . . . . . . . . . . . . . . . . . . . . . . 3
3. Separate Accounts . . . . . . . . . . . . . . . . . . . 3
4. Certification as to Authorized Persons . . . . . . . . . 3
5. Custody of Cash . . . . . . . . . . . . . . . . . . . . . 4
5.1 Purchase of Securities . . . . . . . . . . . . . . . 4
5.2 Redemptions . . . . . . . . . . . . . . . . . . . . 4
5.3 Distributions and Expenses of Fund . . . . . . . . . 4
5.4 Payment in Respect of Securities . . . . . . . . . . 5
5.5 Repayment of Loans . . . . . . . . . . . . . . . . . 5
5.6 Repayment of Cash . . . . . . . . . . . . . . . . . 5
5.7 Foreign Exchange Transactions . . . . . . . . . . . 5
5.8 Other Authorized Payments . . . . . . . . . . . . . 5
5.9 Termination . . . . . . . . . . . . . . . . . . . . 5
6. Securities . . . . . . . . . . . . . . . . . . . . . . . 6
6.1 Segregation and Registration . . . . . . . . . . . . 6
6.2 Voting and Proxies . . . . . . . . . . . . . . . . . 6
6.3 Book-Entry System . . . . . . . . . . . . . . . . . 6
6.4 Use of a Depository . . . . . . . . . . . . . . . . 8
6.5 Use of Book-Entry System for Commercial Paper . . . 9
6.6 Use of Immobilization Programs . . . . . . . . . . 10
6.7 Eurodollar CDs . . . . . . . . . . . . . . . . . . 11
6.8 Options and Futures Transactions . . . . . . . . . 11
6.9 Segregated Account . . . . . . . . . . . . . . . . 12
6.10 Interest Bearing Call or Time Deposits . . . . . . 14
6.11 Transfer of Securities . . . . . . . . . . . . . . 14
7. Redemptions . . . . . . . . . . . . . . . . . . . . . . 16
2
8. Merger, Dissolution, etc. of Fund . . . . . . . . . . . 16
9. Actions of Bank Without Prior Authorization . . . . . . 17
10. Collections and Defaults . . . . . . . . . . . . . . . . . 18
11. Maintenance of Records and Accounting Services . . . . . 18
12.1 Fund Evaluation . . . . . . . . . . . . . . . . . . . . 19
12.2 Yield Calculation . . . . . . . . . . . . . . . . . . . 19
13. Concerning the Bank . . . . . . . . . . . . . . . . . . . 21
13.1 Performance of Duties and
Standard of Care . . . . . . . . . . . . . . . . 21
13.2 Agents and Subcustodians with Respect to Property
of the Fund Held in the United States . . . . . 22
13.3 Duties of the Bank with Respect to Property
of the Fund Held Outside of the United States . . 23
13.4 Insurance . . . . . . . . . . . . . . . . . . . . 27
13.5 Fees and Expenses of Bank . . . . . . . . . . . . 27
13.6 Advances by Bank . . . . . . . . . . . . . . . . . 27
14. Termination . . . . . . . . . . . . . . . . . . . . . . . 28
15. Confidentiality . . . . . . . . . . . . . . . . . . . . 29
16. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 29
17. Amendments . . . . . . . . . . . . . . . . . . . . . . . 30
18. Parties . . . . . . . . . . . . . . . . . . . . . . . . . 30
19. Governing Law . . . . . . . . . . . . . . . . . . . . . . 30
20. Counterparts . . . . . . . . . . . . . . . . . . . . . . 30
21. Entire Agreement . . . . . . . . . . . . . . . . . . . . 30
22. Attachments:
o Schedule A - List of Series
o Schedule B - Income Collection Standards
o Schedule C - Fee Schedule
1
CUSTODIAN AGREEMENT
AGREEMENT made as of this [ ] day of January, 1996, between UBS
PRIVATE INVESTOR FUNDS, INC., a corporation organized under the laws of
Maryland (the "Fund"), and INVESTORS BANK & TRUST COMPANY (the "Bank").
The Fund, an open-end management investment company (the Series of
which are listed in Schedule A herein), desires to place and maintain all
of its portfolio securities and cash in the custody of the Bank. The Bank
has at least the minimum qualifications required by Section 17(f)(1) of the
Investment Company Act of 1940, as amended (the "1940 Act"), to act as
custodian of the portfolio securities and cash of the Fund, and has
indicated its willingness to so act, subject to the terms and conditions of
this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. Bank Appointed Custodian. The Fund hereby appoints the Bank as
custodian of its portfolio securities and cash delivered to the Bank as
hereinafter described and the Bank agrees to act as such upon the terms and
conditions hereinafter set forth.
2. Definitions. Whenever used herein, the terms listed below will
have the following meaning:
2.1 Authorized Person. Authorized Person will mean any of the
persons duly authorized to give Proper Instructions or otherwise act on
behalf of the Fund by appropriate resolution of its Board, and set forth in
a certificate as required by Section 4 hereof.
2.2 Board. Board will mean the Board of Directors of the
Fund.
2.3 Security. The term security as used herein will have the
same meaning as when such term is used in the Securities Act of 1933, as
amended, including, without limitation, any note, stock, treasury stock,
bond, debenture, evidence of indebtedness, certificate of interest or
participation in any profit sharing agreement, collateral-trust
certificate, preorganization certificate or subscription, transferable
share, investment contract, voting-trust certificate, certificate of
deposit for a security, fractional undivided interest in oil, gas, or other
mineral rights, any put, call, straddle, option, or privilege on any
security, certificate of deposit, or group or index of securities
(including any interest therein or based on the value
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thereof), or any put, call, straddle, option, or privilege entered into on
a national securities exchange relating to a foreign currency, or, in
general, any interest or instrument commonly known as a "security", or any
certificate of interest or participation in, temporary or interim
certificate for, receipt for, guarantee of, or warrant or right to
subscribe to, or option contract to purchase or sell any of the foregoing,
and futures, forward contracts and options thereon.
2.4 Portfolio Security. Portfolio Security will mean any
Security owned by the Fund.
2.5 Officers' Certificate. Officers' Certificate will mean,
unless otherwise indicated, any request, direction, instruction, or
certification in writing signed by any two Authorized Persons of the Fund.
2.6 Book-Entry System. Book-Entry System shall mean the
Federal Reserve-Treasury Department Book Entry System for United States
government, instrumentality and agency securities operated by the Federal
Reserve Bank, its successor or successors and its nominee or nominees.
2.7 Depository. Depository shall mean The Depository Trust
Company ("DTC"), a clearing agency registered with the Securities and
Exchange Commission under Section 17A of the Securities Exchange Act of
1934, as amended ("Exchange Act"), its successor or successors and its
nominee or nominees. The term "Depository" shall further mean and include
any other person authorized to act as a depository under the 1940 Act, its
successor or successors and its nominee or nominees, specifically
identified in a certified copy of a resolution of the Board.
2.8 Proper Instructions. Proper Instructions shall mean (i)
instructions regarding the purchase or sale of Portfolio Securities, and
payments and deliveries in connection therewith, given by two Authorized
Persons as shall have been designated in an Officers' Certificate, such
instructions to be given in such form and manner as the Bank and the Fund
shall agree upon from time to time, and (ii) instructions (which may be
continuing instructions) regarding other matters signed or initialed by
such one or more persons from time to time designated in an Officers'
Certificate as having been authorized by the Board. Oral instructions will
be considered Proper Instructions if the Bank reasonably believes them to
have been given by a person authorized to give such instructions with
respect to the transaction involved. The Fund shall cause all oral
instructions to be promptly confirmed in writing. The Bank shall act upon
and comply with any subsequent Proper Instruction which modifies a prior
instruction and the sole obligation of the Bank with respect to any follow-
up or confirmatory instruction shall be to
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make reasonable efforts to detect any discrepancy between the original
instruction and such confirmation and to report such discrepancy to the
Fund. The Fund shall be responsible, at the Fund's expense, for taking any
action, including any reprocessing, necessary to correct any such
discrepancy or error, and to the extent such action requires the Bank to
act, the Fund shall give the Bank specific Proper Instructions as to the
action required. Upon receipt of an Officers' Certificate as to the
authorized by the Board accompanied by a detailed description of procedures
approved by the Fund, Proper Instructions may include communication
effected directly between electro-mechanical or electronic devices provided
that the Board and the Bank are satisfied that such procedures afford
adequate safeguards for the Fund's assets.
2.9 Foreign Securities. The term Foreign Securities as used
herein will have the same meaning as when such term is used in Rule 17f-5
of the 0000 Xxx.
2.10 Series. Series shall mean any Series or portfolio of the
Fund wherein shareholders of such Series have a pro rata interest in the
assets of that Series, but have no interest in the assets of any other
Series of the Fund.
3. Separate Accounts. The Bank will segregate the assets of each
Series or portfolio to which this Agreement relates into a separate account
for each such Series containing the assets of such Series (and all
investment earnings thereon). Unless the context otherwise requires, any
reference in this Agreement to any actions to be taken by the Fund shall be
deemed to refer to the Fund acting on behalf of one or more of its Series,
any reference in this Agreement to any assets of the Fund, including,
without limitation, any Portfolio Securities and cash and earnings thereon,
shall be deemed to refer only to assets of the applicable Series, any duty
or obligation of the Bank hereunder to the Fund shall be deemed to refer to
duties and obligations with respect to the individual Series and any
obligation or liability of the Fund hereunder shall be binding only with
respect to the individual Series, and shall be discharged only out of the
assets of such Series.
4. Certification as to Authorized Persons. The Secretary or
Assistant Secretary of the Fund will at all times maintain on file with the
Bank his or her certification to the Bank, in such form as may be
acceptable to the Bank, of (i) the names and signatures of the Authorized
Persons and (ii) the names of the Board, it being understood that upon the
occurrence of any change in the information set forth in the most recent
certification on file (including without limitation any person named in the
most recent certification who is no longer an Authorized Person as
designated therein), the Secretary or Assistant Secretary of the
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Fund will sign a new or amended certification setting forth the change and
the new, additional or omitted names or signatures. The Bank will be
entitled to rely and act upon any Officers' Certificate given to it by the
Fund which has been signed by Authorized Persons named in the most recent
certification.
5. Custody of Cash. As custodian for the Fund, the Bank will open
and maintain a separate account or accounts in the name of each Series of
the Fund or in the name of the Bank, as Custodian of the Fund, and will
deposit to the account of the Fund all of the cash of the Fund, except for
cash held by a subcustodian appointed pursuant to subsections 13.2 or 13.3
hereof, including borrowed funds, delivered to the Bank, subject only to
draft or order by the Bank acting pursuant to the terms of this Agreement.
Upon receipt by the Bank of Proper Instructions (which may be continuing
instructions) or in the case of payments for redemptions and repurchases of
outstanding shares of common stock of the Fund, notification from the
Fund's transfer agent as provided in Section 7, requesting such payment,
designating the payee or the account or accounts to which the Bank will
release funds for deposit, and stating that it is for a purpose permitted
under the terms of this Section 5, specifying the applicable subsection,
the Bank will make payments of cash held for the accounts of the Fund,
insofar as funds are available for that purpose, only as permitted in
subsections 5.1-5.9 below.
5.1 Purchase of Securities. Upon the purchase of securities
for the Fund, against contemporaneous receipt of such securities by the
Bank registered in the name of the Fund or in the name of, or properly
endorsed and in form for transfer to, the Bank, or a nominee of the Bank,
or receipt for the account of the Bank pursuant to the provisions of
Section 6 below, each such payment to be made at the purchase price shown
on a broker's confirmation (or transaction report in the case of Book-Entry
Paper) of purchase of the securities received by the Bank before such
payment is made, as confirmed in the Proper Instructions received by the
Bank before such payment is made.
5.2 Redemptions. In such amount as may be necessary for the
repurchase or redemption of common shares of the Fund offered for
repurchase or redemption in accordance with Section 7 of this Agreement.
5.3 Distributions and Expenses of Fund. For the payment on
the account of the Fund of dividends or other distributions to shareholders
as may from time to time be declared by the Board, interest, taxes,
management or supervisory fees, distribution fees, shareholder servicing
fees, fees of the Bank for its services hereunder and reimbursemmt of the
expenses and liabilities of the Bank as provided hereunder, fees of any
5
transfer agent, fees for legal, accounting, and auditing services, or other
operating expenses of the Fund.
5.4 Payment in Respect of Securities. For payments in
connection with the conversion, exchange or surrender of Portfolio
Securities or securities subscribed to by the Fund held by or to be
delivered to the Bank.
5.5 Repayment of Loans. To repay loans of money made to the
Fund, but, in the case of final payment, only upon redelivery to the Bank
of any Portfolio Securities pledged or hypothecated therefor and upon
surrender of documents evidencing the loan.
5.6 Repayment of Cash. To repay the cash delivered to the
Fund for the purpose of collateralizing the obligation to return to the
Fund certificates borrowed from the Fund representing Portfolio Securities,
but only upon redelivery to the Bank of such borrowed certificates.
5.7 Foreign Exchange Transactions. For payments in connection
with foreign exchange contracts or options to purchase and sell foreign
currencies for spot and future delivery which may be entered into by the
Bank on behalf of the Fund upon the receipt of Proper Instructions, such
Proper Instructions to specify the currency broker or banking institution
(which may be the Bank, or any other subcustodian or agent hereunder,
acting as principal) with which the contract or option is made, and the
Bank shall have no duty with respect to the selection of such currency
brokers or banking institutions with which the Fund deals or for their
failure to comply with the terms of any contract or option.
5.8 Other Authorized Payments. For other authorized
transactions of the Fund, or other obligations of the Fund incurred for
proper Fund purposes; provided that before making any such payment the Bank
will also receive a certified copy of a resolution of the Board signed by
an Authorized Person (other than the Person certifying such resolution) and
certified by its Secretary or Assistant Secretary, naming the person or
persons to whom such payment is to be made, and either describing the
transaction for which payment is to be made and declaring it to be an
authorized transaction of the Fund, or specifying the amount of the
obligation for which payment is to be made, setting forth the purpose for
which such obligation was incurred and declaring such purpose to be a
proper purpose of the Fund.
5.9 Termination. Upon the termination of this Agreement as
hereinafter set forth pursuant to Section 8 and Section 14 of this
Agreement.
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6. Securities.
6.1 Segregation and Registration. Except as otherwise
provided herein, and except for securities to be delivered to any
subcustodian appointed pursuant to subsections 13.2 or 13.3 hereof, the
Bank as custodian, will receive and hold pursuant to the provisions hereof,
in a separate account or accounts and physically segregated at all times
from those of other persons, any and all Portfolio Securities which may now
or hereafter be delivered to it by or for the account of the Fund. All
such Portfolio Securities will be held or disposed of by the Bank for, and
subject at all times to, the instructions of the Fund pursuant to the terms
of this Agreement. Subject to the specific provisions herein relating to
Portfolio Securities that are not physically held by the Bank, the Bank
will register all Portfolio Securities (unless otherwise directed by Proper
Instructions or an Officers' Certificate), in the name of a registered
nominee of the Bank as defined in the Internal Revenue Code and any
Regulations of the Treasury Department issued thereunder, and will execute
and deliver all such certificates in connection therewith as may be
required by such laws or regulations or under the laws of any state. The
Bank will use its best efforts to the end that the specific Portfolio
Securities held by it hereunder will be at all identifiable.
The Fund will from time to time furnish to the Bank appropriate
instruments to enable it to hold or deliver in proper form for transfer, or
to register in the name of its registered nominee, any Portfolio Securities
which may from time to time be registered in the name of the Fund.
6.2 Voting and Proxies. Neither the Bank nor any nominee of
the Bank will vote any of the Portfolio Securities held hereunder, except
in accordance with Proper Instructions or an Officers' Certificate. The
Bank will execute and deliver, or cause to be executed and delivered, to
the Fund all notices, proxies and proxy soliciting materials with respect
to such Portfolio Securities, such proxies to be executed by the registered
holder of such Securities (if registered otherwise than in the name of the
Fund), but without indicating the manner in which such proxies are to be
voted.
6.3 Book-Entry System. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits
of Fund assets in the Book-Entry System, and (ii) for any subsequent
changes to such arrangements following such approval, the Board has
reviewed and approved the arrangement and has not delivered an Officers'
Certificate to the Bank indicating that the Board has withdrawn its
approval:
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(a) The Bank may keep Portfolio Securities in the Book-
Entry System provided that such Portfolio Securities are represented in an
account ("Account") of the Bank (or its agent) in such system which shall
not include any assets of the Bank (or such agent) other than assets held
as a fiduciary, custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with
respect to the Fund's participation in the Book-Entry System through the
Bank (or any such agent) will identify by book entry Portfolio
Securities which are included with other securities deposited in the
Account and shall at all times during the regular business hours of the
Bank (or such agent) be open for inspection by duly authorized officers,
employees or agents of the Fund. Where securities are transferred to the
account of each Series, the Bank shall also, by book entry or otherwise,
identify as belonging to that Series a quantity of securities in fungible
bulk of securities (i) registered in the name of the Bank or its nominee,
or (ii) shown on the Bank's account on the books of the Federal Reserve
Bank;
(c) The Bank (or its agent) shall pay for securities
purchased for the account of the Fund or shall pay cash collateral against
the return of Portfolio Securities loaned by the Fund upon (i) receipt of
advice from the Book-Entry System that such Securities have been
transferred to the Account, and (ii) the making of an entry on the records
of the Bank (or its agent) to reflect such payment and transfer for the
account of the Fund. The Bank (or its agent) shall transfer securities
sold or loaned for the account of the Fund upon
(i) receipt of advice from the Book-Entry System
that payment for securities sold or payment of the initial cash collateral
against the delivery of securities loaned by the Fund has been transferred
to the Account; and
(ii) the, making of an entry on the records of the
Bank (or its agent) to reflect such transfer and payment for the account of
the Fund. Copies of all advices from the Book-Entry System of transfers of
securities for the account of the Fund shall identify the Fund, be
maintained for the Fund by the Bank and shall be provided to the Fund at
its request. The Bank shall send the Fund a confirmation, as defined by
Rule 17f-4 of the 1940 Act, of any transfers to or from the account of the
Fund;
(d) The Bank will promptly provide the Fund with any
report obtained by the Bank or its agent on the Book-Entry System's
accounting system, internal accounting control and procedures for
safeguarding securities deposited in the Book-Entry System; and
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(e) The Bank shall be liable to the Fund for any loss or
damage to the Fund resulting from use of the Book-Entry System by reason of
any gross negligence, willful misfeasance or bad faith of the Bank or any
of its agents or of any of its or their employees or from any reckless
disregard by the Bank or any such agent of its duty to use its best efforts
to enforce such rights as it may have against the Book-Entry System; at the
election of the Fund, it shall be entitled to be subrogated for the Bank in
any claim against the Book-Entry System or any other person which the Bank
or its agent may have as a consequence of any such loss or damage if and to
the extent that the Fund has not been made whole for any loss or damage.
6.4 Use of a Depository. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits
in DTC or other such Depository and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved
the arrangement and has not delivered an Officers' Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive,
exchange, release, lend, deliver and otherwise deal with Portfolio
Securities including stock dividends, rights and other items of like
nature, and to receive and remit to the Bank on behalf of the Fund all
income and other payments thereon and to take all steps necessary and
proper in connection with the collection thereof, provided that such
securities are maintained in an account which does not include any assets
of the Bank other than assets held as a fiduciary, custodian, or otherwise
for customers;
(b) Registration of Portfolio Securities may be made in
the name of any nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be
made through the clearing medium employed by such Depository for
transactions of participants acting through it. Upon any purchase of
Portfolio Securities, payment will be made only upon delivery of the
securities to or for the account of the Fund and the Fund shall pay cash
collateral against the return of Portfolio Securities loaned by the Fund
only upon delivery of the Securities to or for the account of the Fund; and
upon any sale of Portfolio Securities, delivery of the Securities will be
made only against payment thereof or, in the event Portfolio Securities are
loaned, delivery of Securities will be made only against receipt of the
initial cash collateral to or for the account of the Fund; and
9
(d) The Bank shall be liable to the Fund for any loss or
damage to the Fund resulting from use of a Depository by reason of any
gross negligence, willful misfeasance or bad faith of the Bank or its
employees or from any reckless disregard by the Bank of its duty to use its
best efforts to enforce such rights as it may have against a Depository.
The Fund at its option shall be entitled to be subrogated to the rights of
the Bank with respect to any claims against a Depository as a consequence
of any loss, damage, cost, expense, liability or claim if and to the extent
that the Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim. In this connection, the Bank shall use its
best efforts to ensure that:
(i) The Depository obtains replacement of any
certificated Portfolio Security deposited with it in the event such
Security is lost, destroyed, wrongfully taken or otherwise not available to
be returned to the Bank upon its request;
(ii) Any proxy materials received by a Depository
with respect to Portfolio Securities deposited with such Depository are
forwarded immediately to the Bank for prompt transmittal to the Fund;
(iii) Such Depository immediately forwards to the
Bank confirmation of any purchase or sale of Portfolio Securities and of
the appropriate book entry made by such Depository to the Fund's account;
(iv) Such Depository prepares and delivers to the
Bank such records with respect to the performance of the Bank's obligations
and duties hereunder as may be necessary for the Fund to comply with the
recordkeeping requirements of Section 31(a) of the 1940 Act and the rules
and regulations thereunder; and
(v) Such Depository delivers to the Bank and the
Fund all internal accounting control reports, whether or not audited by
an independent public accountant, as well as such other reports as the Fund
may reasonably request in order to verify the Portfolio Securities held by
such Depository.
6.5 Use of Book-Entry System for Commercial Paper. Provided
(i) the Bank has received a certified copy of a resolution of the Board
specifically approving participation in a system maintained by the Bank for
the holding of commercial paper in book-entry form ("Book-Entry Paper") and
(ii) for each year following such approval the Board has received and
approved the arrangements, upon receipt of Proper Instructions and upon
receipt of confirmation from an Issuer (as defined below) that
10
the Fund has purchased such Issuer's Book-Entry Paper, the Bank shall issue
and hold in book-entry form, on behalf of the Fund, commercial paper issued
by issuers with whom the Bank has entered into a book-entry agreement (the
"Issuers"). In maintaining its Book-Entry Paper system, the Bank agrees
that:
(a) The Bank will maintain all Book-Entry Paper held by
the Fund in an account of the Bank that includes only assets held by it for
customers;
(b) The records of the Bank with respect to the Fund's
purchase of Book-Entry Paper through the Bank will identify, by book-entry,
commercial paper belonging to the Fund which is included in the Book-Entry
Paper system and shall at all times during the regular business hours of
the Bank be open for inspection by duly authorized officers, employees or
agents of the Funds;
(c) The Bank shall pay for Book-Entry Paper purchased
for the account of the Fund upon the contemporaneous (i) receipt of advice
from the Issuer that such sale of Book-Entry Paper has been effected, and
(ii) making of an entry on the records of the Bank to reflect such payment
and transfer for the account of the Fund;
(d) The Bank shall cancel such Book-Entry Paper
obligations upon the maturity thereof upon the contemporaneous (i) receipt
of advice that payment for such Book-Entry Paper has been transferred to
the Fund, and (ii) making of an entry on the records of the Bank to reflect
such payment for the account of the Fund;
(e) The Bank shall transmit to the Fund a transaction
journal confirming each transaction in Book-Entry Paper for the account of
the Fund on the next business day following the transaction; and
(f) The Bank will send to the Fund such reports on its
system of internal accounting control with respect to the Book-Entry Paper
system as the Fund may reasonably request from time to time.
6.6 Use of Immobilization Programs. Provided (i) the Bank has
received a certified copy of a resolution of the Board specifically
approving the maintenance of Portfolio Securities in an immobilization
program operated by a bank which meets the requirements of Section 26(a)(1)
of the 1940 Act, and (ii) for each year following such approval the Board
has reviewed and approved the arrangement and has not delivered an
Officers' Certificate to the Bank indicating that the Board has withdrawn
11
its approval, the Bank shall enter into such immobilization program with
such bank acting as a subcustodian hereunder.
6.7 Eurodollar CDs. Any Portfolio Securities which are
Eurodollar CDs may be physically held by the European branch of the U.S.
banking institution that is the issuer of such Eurodollar CD (a "European
Branch"), provided that such Securities are identified on the books of the
Bank as belonging to a Series of the Fund and that the books of the Bank
identify the European Branch holding such Securities. Notwithstanding any
other provision of this Agreement to the contrary, except as stated in the
first sentence of this subsection 6.7, the Bank shall be under no other
duty with respect to such Eurodollar CDs belonging to the Fund, and shall
have no liability to the Fund or its shareholders with respect to the
actions, inactions, whether negligent or otherwise of such European Branch
in connection with such Eurodollar CDs, except for any loss or damage to
the Fund resulting from the Bank's own gross negligence, willful
misfeasance or bad faith in the performance of its duties hereunder.
6.8 Options and Futures Transactions.
(a) Puts and Calls Traded on Securities Exchanges,
NASDAQ or Over-the-Counter.
1. The Bank shall take action as to put options ("puts")
and call options ("calls") purchased or sold (written) by the Fund
regarding escrow or other arrangements (i) in accordance with the
provisions of any agreement entered into upon receipt of Proper
Instructions between the Bank, any broker-dealer registered under the
Exchange Act and a member of the National Association of Securities
Dealers, Inc. (the "NASD"), and, if necessary, the Fund relating to the
compliance with the rules of the Options Clearing Corporation and of any
registered national securities exchange, or of any similar organization or
organizations.
2. Unless another agreement requires it to do so, the
Bank shall be under no duty or obligation to see that the Fund has
deposited or is maintaining adequate margin, if required, with any broker
in connection with any option, nor shall the Bank be under duty or
obligation to present such option to the broker for exercise unless it
receives Proper Instructions from the Fund. The Bank shall have no
responsibility for the legality of any put or call purchased or sold on
behalf of the Fund, the propriety of any such purchase or sale, or the
adequacy of any collateral delivered to a broker in connection with an
option or deposited to or withdrawn from a Segregated Account (as defined
in subsection 6.9 below). The Bank specifically, but not by way of
limitation, shall not be under any duty or obligation
12
to: (i) periodically check or notify the Fund that the amount of such
collateral held by a broker or held in a Segregated Account is sufficient
to protect such broker of the Fund against any loss; (ii) effect the return
of any collateral delivered to a broker; or (iii) advise the Fund that any
option it holds, has or is about to expire. Such duties or obligations
shall be the sole responsibility of the Fund.
(b) Puts, Calls and Futures Traded on Commodities
Exchanges.
1. The Bank shall take action as to puts, calls and
futures contract ("Futures") purchased or sold by the Fund in accordance
with the provisions of any agreement among the Fund, the Bank and a Futures
Commission Merchant registered under the Commodity Exchange Act, relating
to compliance with the rules of the Commodity Futures Trading Commission
and/or any Contract Market, as defined in the Commodity Exchange Act, or
any similar organization or organizations, regarding account deposits in
connection with transactions by the Fund.
2. The responsibilities and liabilities of the Bank as
to futures, puts and calls traded on commodities exchanges, any Futures
Commission Merchant account and the Segregated Account shall be limited as
set forth in subparagraph (a)(2) of this subsection 6.8 as if such
subparagraph referred to Futures Commission Merchant rather than brokers,
and Futures and puts and calls thereon instead of options.
6.9 Segregated Account. The Bank shall upon receipt of Proper
Instructions establish and maintain a Segregated Account or Accounts for
and on behalf of the Fund, into which Account or Accounts may be
transferred upon receipt of Proper Instructions cash and/or Portfolio
Securities:
(a) in accordance with the provisions of any agreement
among the Fund, the Bank and a broker-dealer registered under the Exchange
Act and a member of the NASD or any Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance with the rules of
the Options Clearing Corporation and of any registered national securities
exchange or the Commodity Futures Trading Commission or any registered
Contract Market, or of any similar organizations regarding escrow or other
arrangements in connection with transactions by the Fund;
(b) for the purpose of segregating cash or securities in
connection with options purchased or written by the Fund or commodity
futures purchased or written by the Fund;
13
(c) for the deposit of liquid assets, such as cash, U.S.
Government securities or other high grade debt obligations, having a market
value (marked to market on a daily basis) at all times equal to not less
than the aggregate purchase price due on the settlement dates of all the
Fund's then outstanding forward commitment or "when-issued" agreements
relating to the purchase of Portfolio Securities and all the Fund's then
outstanding commitments under reverse repurchase agreements entered into
with broker-dealer firms;
(d) for the 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;
(e) for other proper corporate purposes, but only, in
the case of this clause (e), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the Board, or of the
Executive Committee signed by an officer of the Fund and certified by the
Secretary or an Assistant Secretary, setting forth the purpose or purposes
of such Segregated Account and declaring such purposes to be proper
corporate purposes; and
(f) assets may be withdrawn from the Segregated Account
pursuant to Proper Instructions only
(i) with respect to assets deposited in accordance
with the provisions of any agreements referenced in (a)
or (b) above, in accordance with the provisions of such
agreements;
(ii) with respect to assets deposited pursuant to
(c) or (d) above, for sale or delivery to meet the Fund's
obligations under outstanding firm commitment or when
issued agreements for the purchase of Portfolio
Securities and under reverse repurchase agreements;
(iii) for exchange for other liquid assets of
equal or greater value deposited in the Segregated
Account;
(iv) to the extent that the Fund's outstanding
forward commitment or when-issued agreements for the
purchase of portfolio securities or reverse repurchase
agreements are sold to other parties or the Fund's
obligations thereunder are met from assets of the Fund
other than those in the Segregated Account;
14
(v) for delivery upon settlement of a forward
commitment agreement for the sale of Portfolio
Securities; or
(vi) with respect to assets deposited pursuant to
(e) above, in accordance with the purposes of such
account as set forth in Proper Instructions.
6.10 Interest Bearing Call or Time Deposits. The Bank shall,
upon receipt of Proper Instructions relating to the purchase by the Fund of
interest-bearing fixed-term and call deposits, transfer cash, by wire or
otherwise, in such amounts and to such bank or banks as shall be indicated
in such Proper Instructions. The Bank shall include in its records with
respect to the assets of the Fund appropriate notation as to the amount of
each such deposit, the banking institution with which such deposit is made
(the "Deposit Bank"), and shall retain such forms of advice or receipt
evidencing the deposit, if any, as may be forwarded to the Bank by the
Deposit Bank. Such deposits shall be deemed Portfolio Securities of the
Fund and the responsibility of the Bank therefore shall be the same as and
no greater than the Bank's responsibility in respect of other Portfolio
Securities of the Fund.
6.11 Transfer of Securities. The Bank will transfer,
exchange, deliver or release Portfolio Securities held by it hereunder,
insofar as such Securities are available for such purpose, provided that
before making any transfer, exchange, delivery or release under this
subsection the Bank will receive Proper Instructions requesting such
transfer, exchange or delivery stating that it is for a purpose permitted
under the terms of this subsection 6.11, specifying the applicable
subsection, or describing the purpose of the transaction with sufficient
particularity to permit the Bank to ascertain the applicable subsection,
only
(a) upon sales of Portfolio Securities for the account
of the Fund, against contemporaneous receipt by the Bank of payment
therefor in full, each such payment to be in the amount of the sale price
shown in a broker's confirmation, DTC confirmation, or such other evidence
as agreed upon by the Company and the Bank, of sale of the Portfolio
Securities received by the Bank before such payment is made, as confirmed
in the Proper Instructions received by the Bank before such payment is
made;
(b) in exchange for or upon conversion into other
securities alone or other securities and cash pursuant to any plan of
merger, consolidation, reorganization, share split-up, change in par value,
recapitalization or readjustment or
15
otherwise, upon exercise of subscription, purchase or sale or other similar
rights represented by such Portfolio Securities, or for the purpose of
tendering shares in the event of a tender offer therefor, provided however
that in the event of an offer of exchange, tender offer, or other exercise
of rights requiring the physical tender or delivery of Portfolio
Securities, the Bank shall have no liability for failure to so tender in a
timely manner unless such Proper Instructions are received by the Bank at
least two business days prior to the date required for tender, and unless
the Bank (or its agent or subcustodian hereunder) has actual possession of
such Security at least two business days prior to the date of tender;
(c) upon conversion of Portfolio Securities pursuant to
their terms into other securities;
(d) for the purpose of redeeming in-kind shares of the
Fund upon authorization from the Fund;
(e) in the case of option contracts owned by the Fund,
for presentation to the endorsing broker;
(f) when such Portfolio securities are called, redeemed
or retired or otherwise become payable;
(g) for the purpose of effectuating the pledge of
Portfolio Securities held by the Bank in order to collateralize loans made
to the Fund by any bank, including the Bank; provided, however, that such
Portfolio Securities will be released only upon payment to the Bank for the
account of the Fund of the moneys borrowed, except that in cases where
additional collateral is required to secure a borrowing already made, and
such fact is made to appear in the Proper Instructions, further Portfolio
Securities may be released for that purpose without any such payment. In
the event that any such pledged Portfolio Securities are held by the Bank,
they will be so held for the account of the lender. After notice to the
Fund from the lender, in accordance with the normal procedures of the
lender, that an event of deficiency or default on the loan has occurred,
the Bank may deliver such pledged Portfolio Securities to or for the
account of the lender;
(h) for the purpose of releasing certificates
representing Portfolio Securities, against contemporaneous receipt by the
Bank of the fair market value of such security, as set forth in the Proper
Instructions received by the Bank before such payment is made;
(i) for the purpose of delivering securities lent by the
Fund to a bank or broker dealer, but only against receipt in accordance
with street delivery custom except as otherwise
16
provided herein, of adequate collateral as agreed upon from time to time by
the Fund and the Bank, and upon receipt of payment in connection with any
repurchase agreement relating to such securities entered into by the Fund;
(j) for other authorized transactions of the Fund or for
other proper corporate purposes; provided that before making such transfer,
the Bank will also receive a certified copy of resolutions of the Board,
signed by an authorized officer of the Fund (other than the officer
certifying such resolution) and certified by its Secretary or Assistant
Secretary, specifying the Portfolio Securities to be delivered, setting
forth the transaction in or purpose for which such delivery is to
be made, declaring such transaction to be an authorized transaction of the
Fund or such purpose to be a proper corporate purpose, and naming the
person or persons to whom delivery of such securities shall be made; and
(k) for delivery in accordance with the provisions of
any agreement among the Fund, the Bank and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance with
the rules of the Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations, regarding account
deposits in connection with transactions by the Fund; and
(l) upon termination of this Agreement as hereinafter
set forth pursuant to Section 8 and Section 14 of this Agreement.
As to any deliveries made by the Bank pursuant to subsections
(a), (b), (c), (e), (f), (g), (h) and (i) hereof securities or cash
receivable in exchange therefor shall be delivered to the Bank.
7. Redemptions. In the case of payment of assets of the Fund held
by the Bank in connection with redemptions and repurchases by the Fund of
outstanding common shares, the Bank will rely on notification by the Fund's
transfer agent of receipt of a request for redemption and certificates, if
issued, in proper form for redemption before such payment is made. Payment
shall be made in accordance with the Articles and By-laws of the Fund, from
assets available for said purpose.
8. Merger, Dissolution, etc. of Fund. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of
the Fund into or the consolidation of the Fund with another investment
company, the sale by the Fund of all, or substantially all, of its assets
to another investment company, or the liquidation or dissolution of the
Fund and distribution of its assets, the Bank will deliver the Portfolio
17
Securities held by it under this Agreement and disburse cash only upon the
order of the Fund set forth in an Officers' Certificate, accompanied by a
certified copy of a resolution of the Board authorizing any of the
foregoing transactions. Upon completion of such delivery and disbursement
and the payment of the fees, disbursements and expenses of the Bank, this
Agreement will terminate.
9. Actions of Bank Without Prior Authorization. Notwithstanding
anything herein to the contrary, unless and until the Bank receives an
Officers' Certificate to the contrary, it will without prior authorization
or instruction of the Fund or the transfer agent:
(a) Endorse for collection and collect on behalf of and
in the name of the Fund all checks, drafts, or other negotiable or
transferable instruments or other orders for the payment of money received
by it for the account of the Fund and hold for the account of the Fund all
income, dividends, interest and other payments or distribution of cash with
respect to the Portfolio Securities held thereunder;
(b) Present for payment all coupons and other income
items held by it for the account of the Fund which call for payment upon
presentation and hold the cash received by it upon such payment for the
account of the Fund;
(c) Receive and hold for the account of the Fund all
securities received as a distribution on Portfolio Securities as a result
of a stock dividend, share split-up, reorganization, recapitalization,
merger, consolidation, readjustment, distribution of rights and securities
issued with respect to any Portfolio Securities held by it hereunder.
(d) Execute as agent on behalf of the Fund all necessary
ownership and other certificates and affidavits required by the Internal
Revenue Code or the regulations of the Treasury Department issued
thereunder, or by the laws of any state, now or hereafter in effect,
inserting the Funds name on such certificates as the owner of the
securities covered thereby, to the extent it may lawfully do so and as may
be required to obtain payment in respect thereof. The Bank will execute
and deliver such certificates in connection with Portfolio Securities
delivered to it or by it under this Agreement as may be required under the
provisions of the Internal Revenue Code and any Regulations of the Treasury
Department issued thereunder, or under the laws of any State;
(e) Present for payment all Portfolio Securities which
are called, redeemed, retired or otherwise become payable,
18
and hold cash received by it upon payment for the account of the Fund; and
(f) Exchange interim receipts or temporary securities
for definitive securities.
10. Collections and Defaults. The Bank will use all reasonable
efforts to collect any funds which may to its knowledge become collectible
arising from Portfolio Securities, including dividends, interest and other
income, and to transmit to the Fund notice actually received by it of any
call for redemption, offer of exchange, right of subscription,
reorganization or other proceedings affecting such securities. Absent the
default of the payer of such income, the Bank will credit the Fund with the
appropriate amount if such income remains past due beyond a specified
number of days. The exact number of days may be agreed upon and modified
from time to time by written agreement between the Bank and the Fund. Such
agreement will be attached to this Agreement as Schedule B. If Portfolio
Securities upon which such income is payable are in default or payment is
received after due demand or presentation, the Bank will notify the Fund in
writing of any default or refusal to pay within two business days from the
day on which it receives knowledge of such default or refusal. In
addition, the Bank will send the Fund a written report once each month
showing any income on any Portfolio Security held by it which is more than
ten days overdue on the date of such report and which has not previously
been reported.
11. Maintenance of Records and Accounting Services. The Bank will
maintain records with respect to transactions for which the Bank is
responsible pursuant to the terms and conditions of this Agreement, and in
compliance with the applicable rules and regulations of the 1940 Act and
will furnish the Fund daily with a statement of condition of the Fund, or
other reports as may be requested. The Bank will furnish to the Fund at
the end of every month, and at the close of each quarter of the Funds
fiscal year, a list of the Portfolio Securities and the aggregate amount of
cash held by it for the Fund, along with a month-end statement of condition
and other reports and financial statements as may be agreed upon from time
to time between the parties. The books and records of the Bank pertaining
to its actions under this Agreement and reports by the Bank or its
independent accountants concerning its accounting system, procedures for
safeguarding securities and internal accounting controls will be open to
inspection and audit at reasonable times by officers of or auditors
employed by the Fund and will be preserved by the Bank in the manner and in
accordance with the applicable rules and regulations under the 1940 Act.
The Bank recognizes that the books and records it maintains for the Fund
pursuant to this Agreement are the property of the Fund and the Bank agrees
to
19
surrender such books and records upon the request of the Fund or any
Authorized Person of the Fund. The information forwarded to the Fund daily
pursuant to this Section 11 and subsection 13.3(f) shall be sufficiently
detailed to enable the Fund to maintain detailed accounting and tax books
on a daily basis. These records will be maintained by the Custodian
pursuant to Section 12.
The Bank shall perform fund accounting (including Hub and Spoke book
and tax allocations) and shall keep the books of account and render
statements or copies from time to time as reasonably requested by the
Treasurer or any executive officer of the Fund.
The Bank shall assist generally in the preparation of reports to
shareholders and others, audits of accounts, and other ministerial matters
of like nature.
12.1 Fund Evaluation. The Bank shall compute and, unless
otherwise by the Board, determine as of the close of regular trading on the
New York Stock Exchange on each day on which said Exchange is open for
unrestricted trading and as of such other days, or hours, if any, as may be
authorized by the Board, the net asset value and the public offering price
of a share of capital stock of the Fund, such determination to be made in
accordance with the provisions of the Articles and By-laws of the Fund and
Prospectus and Statement of Additional Information relating to the Fund, as
they may from time to time be amended, and any applicable resolutions of
the Board at the time in force and applicable; and promptly notify the
Fund, the proper exchange and the NASD or such other persons as the Fund
may request of the results of such computation and determination. In
computing the net asset value hereunder, the Bank may rely in good faith
upon information furnished to it by any Authorized Person in respect of (i)
the manner of accrual of the liabilities of the Fund and in respect of
liabilities of the Fund not appearing on its books of account kept by the
Bank, (ii) reserves, if any, authorized by the Board or that no such
reserves have been authorized, (iii) the source of the quotations to be
used in computing the net asset value, (iv) the value to be assigned to any
security for which no price quotations are available, and (v) the method of
computation of the public offering price on the basis of the net asset
value of the shares, and the Bank shall not be responsible for any loss
occasioned by such reliance or for any good faith reliance on any
quotations received from a source pursuant to (iii) above.
12.2 Yield Calculation. The Bank will compute the performance
results of the Fund (the "Yield Calculation") in accordance with the
provisions of Release No. 33-6753 and Release No. IC-16245 (February 2,
1988) (the "Releases") promulgated by
20
the Securities and Exchange Commission, and any subsequent amendments to,
published interpretations of or general conventions accepted by the staff
of the Securities and Exchange Commission with respect to such releases or
the subject matter thereof ("Subsequent Staff Positions"), subject to the
terms set forth below:
(a) The Bank shall compute the Yield Calculation for the
Fund for the stated periods of time as shall be mutually agreed upon, and
communicate in a timely manner the result of such computation to the Fund.
(b) In performing the Yield Calculation, the Bank will
derive from the records it generates and maintains for the Fund pursuant to
Section 11 hereof, the items of data necessary for the computation. The
Bank shall have no responsibility to review, confirm or otherwise assume
any duty or liability with respect to the accuracy or correctness of any
such data supplied to it by the Fund, any of the Fund's designated agents
or any of the Fund's designated third party providers.
(c) At the request of the Bank, the Fund shall provide,
and the Bank shall be entitled to rely on, written standards and guidelines
to be followed by the Bank in interpreting and applying the computation
methods set forth in the Releases or any Subsequent Staff Positions as they
specifically apply to the Fund. In the event that the computation methods
in the Releases or the Subsequent Staff Positions or the application to the
Fund of a standard or guideline is not free from doubt or in the event
there is any question of interpretation as to the characterization of a
particular security or any aspect of a security or a payment with respect
thereto (e.g., original issue discount, participating debt security, income
or return of capital, etc.) or otherwise or as to any other element of the
computation which is pertinent to the Fund, the Fund or its designated
agent shall have the full responsibility for making the determination of
how the security, or payment is to be treated for purposes of the
computation and how the computation is to be made and shall inform the Bank
thereof on a timely basis. The Bank shall have no responsibility to make
independent determinations with respect to any item which is covered by
this Section, and shall not be responsible for its computations made in
accordance with such determinations so long as such computations are
mathematically correct.
(d) The Fund shall keep the Bank informed of all
publicly available information and of any non-public advice, or information
obtained by the Fund from its independent auditors or by its personnel or
the personnel of its investment adviser, or Subsequent Staff Positions
related to the computations to be undertaken by the Bank pursuant to this
Agreement and the Bank
21
shall not be deemed to have knowledge of such information (except as
contained in the Releases) unless it has been furnished to the Bank in
writing.
13. Concerning the Bank.
13.1 Performance of Duties and Standard of Care. In
performing its duties hereunder and any other duties listed on any Schedule
hereto, if any, the Bank will be entitled to receive and act upon the
advice of independent counsel of its own selection, which may be counsel
for the Fund, and will be without liability for any taken or thing done or
omitted to be done in accordance with this Agreement in good faith in
conformity with such advice. In the performance of its duties hereunder,
the Bank will be protected and not be liable, and will be indemnified and
held harmless for any action taken or omitted to be taken by it in good
faith reliance upon the terms of this Agreement, any Officers' Certificate,
Proper Instructions, resolution of the Board, telegram, notice, request,
certificate or other instrument reasonably believed by the Bank to be
genuine and for any other loss to the Fund except in the case of its gross
negligence, willful misfeasance or bad faith in the performance of its
duties or reckless disregard of its obligations and duties hereunder.
The Bank will be under no duty or obligation to inquire into
and will not be liable for:
(a) the validity of the issue of any Portfolio
Securities purchased by or for the Fund, the legality of the purchases
thereof or the propriety of the price incurred therefor;
(b) the legality of any sale of any Portfolio Securities
by or for the Fund or the propriety of the amount for which the same are
sold;
(c) the legality of an issue or sale of any common
shares of the Fund;
(d) the legality of the repurchase of any common shares
of the Fund;
(e) the legality of the declaration of any dividend by
the Fund or the legality of the distribution of any Portfolio Securities as
payment in kind of such dividend; and
(f) any property or moneys of the Fund unless and until
received by it, or its agent, and any such property or moneys delivered or
paid by it pursuant to the terms hereof.
22
Moreover, the Bank will not be under any duty or obligation to
ascertain whether any Portfolio Securities at any time delivered to or held
by it for the account of the Fund are such as may properly be held by the
Fund under the provisions of its Articles, By-laws, any federal or state
statutes or any rule or regulation of any governmental agency.
Notwithstanding anything in this Agreement to the contrary, in
no event shall the Bank be liable hereunder or to any third party for any
losses or damages of any kind resulting from acts of God, earthquakes,
fires, floods, storms or other disturbances of nature, epidemics, riots,
nationalization, expropriation, currency restrictions, acts of war, civil
war or terrorism, insurrection, nuclear fusion, fission or radiation, the
interruption, loss or malfunction of utilities, transportation, or
computers (hardware or software) and computer facilities, the
unavailability of energy sources and other similar happenings or events
except as results from the Bank's own gross negligence. The Bank agrees,
however, to maintain adequate backup facilities and disaster recovery
programs in an effort to minimize the disruption of service caused by any
of the conditions noted above.
13.2 Agents and Subcustodians with Respect to Property of the
Fund Held in the United States. The Bank, upon written consent of the
Board, may employ agents in the performance of its duties hereunder and
shall be responsible for the acts and omissions of such agents as if
perform by the Bank hereunder. Without limiting the foregoing, certain
duties of the Bank hereunder may be performed by one or more affiliates of
the Bank.
At the request of the Fund, and upon receipt of Proper
Instructions, the Bank will employ subcustodians, designated by the Fund,
provided that any such subcustodian meets at least the minimum
qualifications required by Section 17(f)(1) of the 1940 Act to act as a
custodian of the Fund's assets with respect to property of the Fund held in
the United States and has been previously approved by the Board. The Bank
shall have no liability to the Fund or any other person by reason of any
act or omission of any subcustodian and the Fund shall indemnify the Bank
and hold it harmless from and against any and all actions, suits and claim,
arising directly or indirectly out of the performance of any subcustodian.
Upon request of the Bank, the Fund shall assume the entire defense of any
action, suit, or claim subject to the foregoing indemnity. The Fund shall
pay all fees and expenses of any subcustodian.
23
13.3 Duties of the Bank with Respect to Property of the Fund
Held Outside of the United States.
(a) Appointment of Foreign Sub-Custodians. The Fund
hereby authorizes and instructs the Bank to employ as sub-custodians for
the Fund's Foreign Securities and other assets maintained outside the
United States the foreign banking institutions and foreign securities
depositories designated by the Board (each, a "Selected Foreign Sub-
Custodian"). Upon receipt of Proper Instructions, together with a
certified resolution of the Board, the Bank and the Fund may agree to
designate additional foreign banking institutions and foreign securities
depositories to act as Selected Foreign Sub-Custodians hereunder. Upon
receipt of Proper Instructions, the Fund may instruct the Bank to cease the
employment of any one or more such Selected Foreign Sub-Custodians for
maintaining custody of the Funds assets, and the Bank shall so cease to
employ such sub-custodian as soon as alternate custodial arrangements have
been implemented.
(b) Foreign Securities Depositories. Except as may
otherwise be agreed upon in writing by the Bank and the Fund, assets of the
Fund shall be maintained in foreign securities depositories that qualify as
eligible foreign custodians under Rule 17f-5 of the 1940 Act, pursuant to
written agreements between such depositories and the Bank. Where possible,
such arrangements shall include entry into agreements containing the
provisions set forth in subparagraph (d) hereof. Notwithstanding the
foregoing, except as may be agreed upon in writing by the Bank and the
Fund, the Fund authorized the deposit in Euro-clear, the securities
clearance and depository facilities operated by Xxxxxx Guaranty Trust
Company of [2 lines missing] utilize such securities depository in
connection with settlements of purchases and sales of securities and
deliveries and returns of securities, until notified to the contrary
pursuant to subparagraph (a) hereunder.
(c) Segregation of Securities. The Bank shall identify
on its books as belonging to the Fund the Foreign Portfolio Securities held
by each Selected Foreign Sub-Custodian. Each agreement pursuant to which
the Bank employs a foreign banking institution shall require that such
institution establish a custody account for the Bank and hold in that
account, Foreign Portfolio Securities and other assets of the Fund, and, in
the event that such institution deposits Foreign Portfolio Securities in a
foreign securities depository, that it shall identify on its books as
belonging to the Bank the securities so deposited.
(d) Agreements with Foreign Banking Institutions. Each
of the agreements pursuant to which a foreign institution holds assets of
the Fund (each, a "Foreign Sub-Custodian
24
Agreement") shall be substantially in the form previously made available to
the Fund and shall provide that: (a) the Fund's assets will not be subject
to any right, charge, security interest, lien or claim of any kind in favor
of the foreign banking institution or its creditors or agent, except a
claim of payment for their safe custody or administration (including,
without limitation, any fees or taxes payable upon transfers or
reregistration of securities); (b) beneficial ownership of the Fund's
assets will be freely transferable without the payment of money or value
other than for custody or administration (including, without limitation,
any fees or taxes payable upon transfers or reregistration of securities);
(c) adequate records will be maintained identifying the assets as belonging
to the Bank; (d) officers of or auditors employed by, or other
representatives of the Bank, including to the extent permitted under
applicable law, the independent public accountants for the Fund, will be
given access to the books and records of the foreign banking institution
relating to its actions under its agreement with the Bank; and (e) assets
of the Fund held by the Selected Foreign Sub-Custodian will be subject only
to the instructions of the Bank or its agents.
(e) Access of Independent Accountants of the Fund. Upon
request of the Fund, the Bank will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books and
records of any foreign banking institution employed as a Selected Foreign
Sub-Custodian insofar as such books and records relate to the performance
of such foreign banking institution under its Foreign Sub-Custodian
Agreement.
(f) Reports by Bank. The Bank will supply to the Fund
from time to time, as may agreed upon, statements in respect of the
securities and other assets of the Fund held by Selected Foreign Sub-
Custodians, including but not limited to an identification of entities
having possession of the Foreign Portfolio Securities and other assets of
the Fund.
(g) Transactions in Foreign Custody Account.
Transactions with respect to the assets of the Fund held by a Selected
Foreign Sub-Custodian shall be effected pursuant to Proper Instructions
from the Fund to the Bank and shall be effected in accordance with the
applicable Foreign Sub-Custodian Agreement. If at any time any Foreign
Portfolio Securities shall be registered in the name of the nominee of the
Selected Foreign Sub-Custodian, the Fund agrees to hold any such nominee
harmless from any liability by reason of the registration of such
securities in the name of such nominee.
Notwithstanding any provision of this Agreement to the
contrary, settlement and payment for Foreign Portfolio Securities
25
received for the account of the Fund and delivery of Foreign Portfolio
Securities maintained for the account of the Fund may be effected in
accordance with the customary established securities trading or securities
processing practices and procedures in the jurisdiction or market in which
the transaction occurs, including, without limitation, delivering
securities to the purchaser thereof or to a dealer therefor (or an agent
for such or purchaser or dealer) against a receipt with the expectation of
receiving later payment for such securities from such purchaser or dealer.
In connection with any action to be taken with respect to the
Foreign Portfolio Securities held hereunder, including, without limitation,
the exercise of any voting rights, subscription rights, redemption rights,
exchange rights, conversion rights or tender rights, or any other action in
connection with any other right, interest or privilege with respect to such
Securities (collectively, the "Rights"), the Bank shall promptly transmit
to the Fund such information in connection therewith as is made available
to the Bank by the Foreign Sub-Custodian, and shall promptly forward to the
applicable Foreign Sub-Custodian any instructions, forms or certifications
with respect to such Rights, and any instructions relating to the actions
to be taken in connection therewith, as the Bank shall receive from the
Fund pursuant to Proper instructions. Notwithstanding the foregoing, the
Bank shall have no further duty or obligation with respect to such Rights,
including, without limitation, the determination of whether the Fund is
entitled to participate in such Rights under applicable U.S. and foreign
laws, or the determination of whether any action proposed to be taken with
respect to such Rights by the Fund or by the applicable Foreign Sub-
Custodian will comply with all applicable terms and conditions of any such
Rights or any applicable laws or regulations, or market practices within
the market in which such action is to be taken or omitted.
(h) Liability of Selected Foreign Sub-Custodians. Each
Foreign Sub-Custodian Agreement with a foreign banking institution shall
require the institution to exercise reasonable care in the performance of
its duties and to indemnify, and hold harmless, the Bank and each Fund from
and against certain losses, damages, costs, expenses, liabilities or claims
arising out of its failure to exercise reasonable care or in connection
with the institution's performance of such obligations, all as set forth in
the applicable Foreign Sub-Custodian Agreement. The Fund acknowledges that
the Bank, as a participant in Euro-clear, is subject to the Terms and
Conditions Governing the Euro-Clear System, a copy of which has been made
available to the Fund. The Fund acknowledges that pursuant to such Terms
and Conditions, Xxxxxx Guaranty Brussels shall have the sole right to
exercise or assert any and all rights or claims in respect of actions or
26
omissions of, or the bankruptcy or insolvency of, any other depository,
clearance system or custodian utilized by Euro-clear in connection with the
Fund's securities and other assets.
(i) Liability of Bank. The Bank shall have no more or
less responsibility or liability on account of the acts or omissions of any
Selected Foreign Sub-Custodian employed hereunder than any such Selected
Foreign Sub-Custodian has to the Bank, provided that the provision shall
not protect the Bank in the event of the Bank's own negligence or bad faith
and, without limiting the foregoing, the Bank shall not be liable for any
loss, damage, cost, expense, liability or claim resulting from
nationalization, expropriation, currency restrictions, or acts of war or
terrorism, political risk (including, but not limited to, exchange control
restrictions, confiscation, insurrection, civil strife or armed
hostilities), other losses due to Acts of God, nuclear incident or any loss
where the Selected Foreign Sub-Custodian has otherwise exercised reasonable
care.
(j) Monitoring Responsibilities. The Bank shall
furnish, at the meeting of the Board and annually thereafter to the Fund,
information concerning the Selected Foreign Sub-Custodians employed
hereunder for use by the Fund in evaluating such Selected Foreign Sub-
Custodians to ensure compliance with the requirements of Rule 17f-5 of the
Act. In addition, the Bank will promptly inform the Fund in the event that
the Bank is notified by a Selected Foreign Sub-Custodian that there appears
to be a substantial likelihood that its shareholders' equity will decline
below $200 million (U.S. dollars or the equivalent thereof) or that its
shareholders' equity has declined below $200 million (in each case computed
in accordance with generally accepted U.S. accounting principles) or any
other capital adequacy test applicable to it by exemptive order, or if the
Bank has actual knowledge of any material loss of the assets of the Fund
held by a Foreign Sub-Custodian. In addition the Bank will, upon request
by the Fund, furnish shareholder equity reports to the Fund. The Bank will
not add to or otherwise modify the schedule of foreign sub-custodians
without appropriate notification to the Fund, including information
concerning new or proposed foreign sub-custodians to ensure compliance with
the requirements of Rule 17f-5 of the 1940 Act.
(k) Tax Law. The Bank shall have no responsibility or
liability for any obligations now or hereafter imposed on the Fund or the
Bank as custodian of the Fund by the tax laws of any jurisdiction, and it
shall be the responsibility of the Fund to notify the Bank of the
obligations imposed on the Fund or the Bank as the custodian of the Fund by
the tax law of any non-U.S. jurisdiction, including responsibility for
withholding and other taxes, assessments or other governmental charges,
certifications and governmental reporting. The sole
27
responsibility of the Custodian with regard to such tax law shall be to use
reasonable efforts to assist the Fund with respect to any claim for
exemption or refund under the tax law of jurisdictions for which the Fund
has provided such information.
13.4 Insurance. The Bank shall use the same care with respect
to the safekeeping of Portfolio Securities and cash of the Fund held by it
as it uses in respect of its own similar property but it need not maintain
any special insurance for the benefit of the Fund.
13.5 Fees and Expenses of Bank. The Fund will pay or
reimburse the Bank from time to time for any transfer taxes payable upon
transfer of Portfolio Securities made hereunder, and for all necessary
proper disbursements, expenses and charges made or incurred by the Bank in
the performance of this Agreement (including any duties listed on any
Schedule hereto, if any) including any indemnities for any loss,
liabilities or expense to the Bank as provided above. For the services
rendered by the Bank hereunder, the Fund will pay to the Bank such
compensation or fees at such rate and at such times as shall be upon in
writing by the parties from time to time. The Bank will also be entitled
to reimbursement by the Fund for all reasonable expenses incurred in
conjunction with the termination of this Agreement.
13.6 Advances by Bank. The Bank may, in its sole discretion,
advance funds on behalf of the Fund to make any payment permitted by this
Agreement upon receipt of any proper authorization required by this
Agreement for such payments by the Fund. Should such a payment or
payments, with advanced funds, result in an overdraft (due to
insufficiencies of the Fund's account with the Bank, or for any other
reason) this Agreement deems any such overdraft or related indebtedness, a
loan made by the Bank to the Fund payable on demand and bearing interest at
the current rate charged by the Bank for such loans unless the Fund shall
provide the Bank with agreed upon compensating balances. The Fund agrees
that the Bank shall have a continuing lien and security interest to the
extent of any overdraft or indebtedness, in and to any property at any time
held by it for the Fund's benefit or in which the Fund has an interest and
which is then in the Bank's possession or control (or in the possession or
control of any third party acting on the Bank's behalf). The Fund
authorizes the Bank, in its sole discretion, at any time to charge any
overdraft or indebtedness, together with interest due thereupon against any
balance of account standing to the credit of the Fund on the Bank's books.
The Bank agrees to credit the Fund for interest on any cash balances left
uninvested at the Bank. The Bank will present an accounting of all
interest owed by the Fund on overdrafts and to the Fund on uninvested cash
balances on a monthly basis with its xxxx for custody services.
28
14. Termination.
(a) This Agreement way be at any time after one year
from the date of this Agreement without penalty upon sixty days written
notice delivered by either party to the other by means of registered mail,
and upon the expiration of such sixty days this Agreement will terminate;
provided, however, that the effective date of such termination may be
postponed to a date not more than ninety days from the date of delivery of
such notice (i) by the Bank in order to prepare for the transfer by the
Bank of all of the assets of the Fund held hereunder, and (ii) by the Fund
in order to give the Fund an opportunity to make suitable arrangements for
a successor custodian. The Fund may, however, immediately terminate this
Agreement if a conservator or receiver is appointed for the Bank by the
Commonwealth of Massachusetts, Division of Banks or upon the happening of a
like event at the direction of an appropriate regulatory agency or court of
competent jurisdiction. At any time after the termination of this
Agreement, the Fund will, at its request, have access to the records of the
Bank relating to the performance of its duties as custodian.
(b) In the event of the termination of this Agreement,
the Bank will immediately upon receipt or transmittal, as the case may be,
of notice of termination, commence and prosecute diligently to completion
the transfer of all cash and the delivery of all Portfolio Securities duly
endorsed and all records maintained under Section 11 to the successor
custodian when appointed by the Fund. The obligation of the Bank to
deliver and transfer over the assets of the Fund held by it directly to
such successor custodian will commence as soon as such successor is
appointed and will continue until completed as aforesaid. If the Fund does
not select a successor custodian within ninety (90) days from the date of
delivery of notice of termination the [missing text?] the Fund held by the
Bank to a bank or trust company of its own selection which meets the
requirements of Section 17(f)(1) of the 1940 Act and has a reported
capital, surplus and undivided profits aggregating not less than
$2,000,000, to be held as the property of the Fund under terms similar to
those on which they were held by the Bank, whereupon such bank or trust
company so selected by the Bank will become the successor custodian of such
assets of the Fund with the same effect as though selected by the Board.
(c) Prior to the expiration of ninety (90) days after
notice of termination has been given, the Fund may furnish the Bank with an
order of the Fund advising that a successor custodian cannot be found
willing and able to act upon reasonable and customary terms and that there
has been submitted to the shareholders of the Fund the question of whether
the Fund will be liquidated or will function without a custodian for the
assets of
29
the Fund held by the Bank. In that event the Bank will deliver the
Portfolio Securities and cash of the Fund held by it, subject as aforesaid,
in accordance with one of such alternatives which may be approved by the
requisite vote of shareholders, upon receipt by the Bank of a copy of the
minutes of the meeting of shareholders at which action was taken, certified
by the Fund's Secretary and an opinion of counsel to the Fund in form and
content satisfactory to the Bank.
15. Confidentiality. Both parties hereto agree that any non-public
information obtained hereunder concerning the other party is confidential
and may not be disclosed to any other person without the consent of the
other party, except as may be required by applicable law or at the request
of a governmental agency. The parties further agree that a breach of this
provision would irreparably damage the other party and accordingly agree
that each of them is entitled, without bond or other security, to an
injunction or injunctions to prevent breaches of this provision.
16. Notices. Any notice or other instrument in writing authorized
or required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and mailed or delivered to it
at its office at the address set forth below; namely:
(a) In the case of notices sent to the Fund to:
UBS PRIVATE INVESTOR FUNDS, INC.
c\o Signature Financial Group Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxx Xxxxxxxx
with copies to:
Union Bank of Switzerland, New York Branch
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxxxxx
and
Union Bank of Switzerland, New York Branch
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxx Xxxxxxxx
30
(b) in the case of notices sent to the Bank to:
Investors Bank & Trust Company
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx Xxxx
or at such other place as such party may from time to time designate in
writing.
17. Amendments. This Agreement may not be altered or amended,
except by an instrument in writing, executed by both parties, and in the
case of the Fund, such alteration or amendment will be authorized and
approved by its Board.
18. Parties. This Agreement will be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement will not be assignable by
the Fund without the written consent of the Bank or by the Bank without the
written consent of the Fund, authorized and approved by its Board; and
provided further termination proceedings pursuant to Section 14 hereof will
not be deemed to be an assignment within the meaning of this provision.
19. Governing Law. This Agreement and all performance hereunder
will be governed by the laws of the Commonwealth of Massachusetts.
20. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
21. Entire Agreement. This Agreement constitutes the entire
agreement between the parties and supersedes and terminates, as of the date
hereof, all prior agreements between the Bank and the Fund, whether written
or oral, relating to the custody of the Fund's assets.
31
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized as of the day and year first written above.
UBS PRIVATE INVESTOR FUNDS, INC.
By:____________________________
Name:
Title:
ATTEST:
____________________________
INVESTORS BANK & TRUST COMPANY
By:____________________________
Name:
Title:
ATTEST:
____________________________
DATE:_______________________
32
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized as of the day and year first written above.
UBS PRIVATE INVESTOR FUNDS, INC.
By:____________________________
Name:
Title:
ATTEST:
____________________________
INVESTORS BANK & TRUST COMPANY
By:____________________________
Name:
Title:
ATTEST:
____________________________
DATE:_______________________
33
SCHEDULE A
UBS PRIVATE INVESTOR FUNDS, INC.
UBS Tax Exempt Bond Fund
UBS U.S. Equity Fund
UBS Bond Fund
UBS International Equity Fund