CUSTODIAN SERVICES AGREEMENT
THIS AGREEMENT is made as of May 16, 2005 by and between PFPC TRUST
COMPANY, a limited purpose trust company incorporated under the laws of Delaware
("PFPC Trust"), and FIRST TRUST/FIDAC MORTGAGE INCOME FUND, a Massachusetts
business trust (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as a closed-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to retain PFPC Trust to provide custodian
services, and PFPC Trust wishes to furnish custodian services, either directly
or through an affiliate or affiliates, as more fully described herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(c) "Authorized Person" means any officer of the Fund and any other
person authorized by the Fund to give Oral or Written
Instructions on behalf of the Fund. An Authorized Person's scope
of authority may be limited by setting forth such limitation in a
written document signed by both parties hereto.
(d) "Book-Entry System" means the Federal Reserve Treasury book-entry
system for United States and federal agency securities, its
successor or successors, and its nominee or nominees and any
book-entry system registered with the SEC under the 1934 Act.
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(e) "Oral Instructions" mean oral instructions received by PFPC Trust
from an Authorized Person or from a person reasonably believed by
PFPC Trust to be an Authorized Person. PFPC Trust may, in its
sole discretion in each separate instance, consider and rely upon
instructions it receives from an Authorized Person via electronic
mail as Oral Instructions.
(f) "PFPC Trust" means PFPC Trust Company or a subsidiary or
affiliate of PFPC Trust Company.
(g) "SEC" means the Securities and Exchange Commission.
(h) "Securities Laws" mean the 1933 Act, the 1934 Act and the 1940
Act.
(i) "Shares" mean the shares of beneficial interest of any series or
class of the Fund.
(j) "Property" means:
(i) any and all securities and other investment items which the
Fund may from time to time deposit, or cause to be
deposited, with PFPC Trust or which PFPC Trust may from
time to time hold for the Fund;
(ii) all income in respect of any of such securities or other
investment items;
(iii) all proceeds of the sale of any of such securities or
investment items; and
(iv) all proceeds of the sale of securities issued by the Fund,
which are received by PFPC Trust from time to time, from or
on behalf of the Fund.
(k) "Written Instructions" mean (i) written instructions signed by
two Authorized Persons (or persons reasonably believed by PFPC
Trust to be Authorized Persons) and received by PFPC Trust or
(ii) trade instructions transmitted by means of an electronic
transaction reporting system which requires the use of a password
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or other authorized identifier in order to gain access. The
instructions may be delivered electronically (with respect to
sub-item (ii) above) or by hand, mail or facsimile sending
device.
2. APPOINTMENT. The Fund hereby appoints PFPC Trust to provide custodian
services to the Fund and PFPC Trust accepts such appointment and agrees
to furnish such services.
3. COMPLIANCE WITH LAWS.
PFPC Trust undertakes to comply with material applicable requirements
of the Securities Laws and material laws, rules and regulations of
governmental authorities having jurisdiction with respect to the duties
to be performed by PFPC Trust hereunder. Except as specifically set
forth herein, PFPC Trust assumes no responsibility for such compliance
by the Fund or any other entity.
4. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC Trust shall act
only upon Oral Instructions or Written Instructions.
(b) PFPC Trust shall be entitled to rely upon any Oral Instruction or
Written Instruction it receives from an Authorized Person
pursuant to this Agreement. PFPC Trust may assume that any Oral
Instructions or Written Instructions received hereunder are not
in any way inconsistent with the provisions of organizational
documents of the Fund or of any vote, resolution or proceeding of
the Fund's board of directors or of the Fund's shareholders,
unless and until PFPC Trust receives Written Instructions to the
contrary.
(c) The Fund agrees to forward to PFPC Trust Written Instructions
confirming Oral Instructions (except where such Oral Instructions
are given by PFPC Trust or its affiliates) so that PFPC Trust
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receives the Written Instructions by the close of business on the
same day that such Oral Instructions are received. The fact that
such confirming Written Instructions are not received by PFPC
Trust or differ from the Oral Instructions shall in no way
invalidate the transactions or enforceability of the transactions
authorized by the Oral Instructions or PFPC Trust's ability to
rely upon such Oral Instructions.
5. RIGHT TO RECEIVE ADVICE.
(a) Advice of the Fund. If PFPC Trust is in doubt as to any action it
should or should not take, PFPC Trust may request directions or
advice, including Oral Instructions or Written Instructions, from
the Fund. The Fund shall pay the reasonable cost of any counsel
retained by PFPC Trust with prior notice to the Fund.
(b) Advice of Counsel. If PFPC Trust shall be in doubt as to any
question of law pertaining to any action it should or should not
take, PFPC Trust may request advice from counsel of its own
choosing (who may be counsel for the Fund, the Fund's investment
adviser or PFPC Trust, at the option of PFPC Trust).
(c) Conflicting Advice. In the event of a conflict between directions
or advice or Oral Instructions or Written Instructions PFPC Trust
receives from the Fund, and the advice it receives from counsel,
PFPC Trust shall be entitled to rely upon and follow the advice
of counsel.
(d) Protection of PFPC Trust. PFPC Trust shall be indemnified by the
Fund and without liability for any action PFPC Trust takes or
does not take in reliance upon directions or advice or Oral
Instructions or Written Instructions PFPC Trust receives from or
on behalf of the Fund or from counsel and which PFPC Trust
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believes, in good faith, to be consistent with those directions
or advice or Oral Instructions or Written Instructions. Nothing
in this section shall be construed so as to impose an obligation
upon PFPC Trust (i) to seek such directions or advice or Oral
Instructions or Written Instructions, or (ii) to act in
accordance with such directions or advice or Oral Instructions or
Written Instructions.
6. RECORDS; VISITS.
(a) The books and records pertaining to the Fund, which are in the
possession or under the control of PFPC Trust, shall be the
property of the Fund. Such books and records shall be prepared
and maintained as required by the 1940 Act and other applicable
securities laws, rules and regulations provided the Fund provides
PFPC Trust with written notice of such laws, rules and
regulations, other than the 1940 Act And The Internal Revenue
Code Of 1986, as amended, that are applicable. The Fund and
Authorized Persons shall have access to such books and records at
all times during PFPC Trust's normal business hours upon
reasonable advance notice. Upon the reasonable request of the
Fund, copies of any such books and records shall be provided by
PFPC Trust to the Fund or to an authorized representative of the
Fund, at the Fund's expense.
(b) PFPC Trust shall keep the following records:
(i) all books and records as are customarily maintained by the
custodian for a registered investment company.
7. CONFIDENTIALITY. Each party shall keep confidential any information
relating to the other party's business ("Confidential Information").
Confidential Information shall include (a) any data or information that
is competitively sensitive material, and not generally known to the
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public, including, but not limited to, information about product plans,
marketing strategies, finances, operations, customer relationships,
customer profiles, customer lists, sales estimates, business plans, and
internal performance results relating to the past, present or future
business activities of the Fund or PFPC Trust and their respective
subsidiaries and affiliated companies; (b) any scientific or technical
information, design, process, procedure, formula, or improvement that
is commercially valuable and secret in the sense that its
confidentiality affords the Fund or PFPC Trust a competitive advantage
over its competitors; (c) all confidential or proprietary concepts,
documentation, reports, data, specifications, computer software, source
code, object code, flow charts, databases, inventions, know-how, and
trade secrets, whether or not patentable or copyrightable; and (d)
anything designated as confidential. Notwithstanding the foregoing,
information shall not be Confidential Information and shall not be
subject to such confidentiality obligations if: (a) it is necessary for
PFPC Trust to release such information in connection with the provision
of services under this Agreement; (b) it is already known to the
receiving party at the time it is obtained; (c) it is or becomes
publicly known or available through no wrongful act of the receiving
party; (d) it is rightfully received from a third party who, to the
best of the receiving party's knowledge, is not under a duty of
confidentiality; (e) it is released by the protected party to a third
party without restriction; (f) it is requested or required to be
disclosed by the receiving party pursuant to a court order, subpoena,
governmental or regulatory agency request or law (provided the
receiving party will provide the other party written notice of the
same, to the extent such notice is permitted); (g) it is relevant to
the defense of any claim or cause of action asserted against the
receiving party; or (h) it has been or is independently developed or
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obtained by the receiving party. PFPC Trust acknowledges and agrees
that in connection with its services under this Agreement it receives
non-public confidential portfolio holdings information ("Portfolio
Information") with respect to the Fund. PFPC Trust agrees that, subject
to the foregoing provisions of and the exceptions set forth in this
Section 7 (other than the exception set forth above in this Section as
Sub-item (a), which exception set forth in sub-item (a) shall not be
applicable to the Fund's Portfolio Information), PFPC Trust will keep
confidential the Fund's Portfolio Information and will not disclose the
Fund's Portfolio Information other than pursuant to a Written
Instruction (such Written Instruction may be a standing Written
Instruction).
8. COOPERATION WITH ACCOUNTANTS. PFPC Trust shall cooperate with the
Fund's independent public accountants and shall take all reasonable
action to make any requested information available to such accountants
as reasonably requested by the Fund.
9. PFPC SYSTEM. PFPC Trust shall retain title to and ownership of any and
all data bases, computer programs, screen formats, report formats,
interactive design techniques, derivative works, inventions,
discoveries, patentable or copyrightable matters, concepts, expertise,
patents, copyrights, trade secrets, and other related legal rights
utilized by PFPC Trust in connection with the services provided by PFPC
Trust to the Fund.
10. DISASTER RECOVERY. PFPC Trust shall enter into and shall maintain in
effect with appropriate parties one or more agreements making
reasonable provisions for emergency use of electronic data processing
equipment to the extent appropriate equipment is available. In the
event of equipment failures, PFPC Trust shall, at no additional expense
to the Fund, take reasonable steps to minimize service interruptions.
PFPC Trust shall have no liability with respect to the loss of data or
service interruptions caused by equipment failure provided such loss or
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interruption is not caused by PFPC Trust's own willful misfeasance, bad
faith, negligence or reckless disregard of its duties or obligations
under this Agreement.
11. COMPENSATION.
(a) As compensation for custody services rendered by PFPC Trust
during the term of this Agreement, the Fund will pay to PFPC
Trust a fee or fees as may be agreed to in writing from time to
time by the Fund and PFPC Trust. The Fund acknowledges that PFPC
Trust may receive float benefits in connection with maintaining
certain accounts required to provide services under this
Agreement.
(b) The undersigned hereby represents and warrants to PFPC Trust that
(i) the terms of this Agreement, (ii) the fees and expenses
associated with this Agreement, and (iii) any benefits accruing
to PFPC Trust or to the adviser or sponsor to the Fund in
connection with this Agreement, including but not limited to any
fee waivers, conversion cost reimbursements, up front payments,
signing payments or periodic payments made or to be made by PFPC
Trust to such adviser or sponsor or any affiliate of the Fund
relating to this Agreement have been fully disclosed to the board
of directors of the Fund and that, if required by applicable law,
such board of directors has approved or will approve the terms of
this Agreement, any such fees and expenses, and any such
benefits.
12. INDEMNIFICATION.
(a) The Fund agrees to indemnify, defend and hold harmless PFPC Trust
and its affiliates, including their respective officers,
directors, agents and employees from all taxes, charges,
expenses, assessments, claims and liabilities (including, without
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limitation, reasonable attorneys' fees and disbursements and
liabilities arising under the Securities Laws and any state and
foreign securities and blue sky laws) ("Claims") arising directly
or indirectly from any action or omission to act which PFPC Trust
takes in connection with the provision of services to the Fund.
Neither PFPC Trust, nor any of its affiliates, shall be
indemnified against any liability (or any expenses incident to
such liability) caused by PFPC Trust's or its affiliates' own
willful misfeasance, bad faith, negligence or reckless disregard
in the performance of PFPC Trust's activities under this
Agreement. The provisions of this Section 13 shall survive
termination of this Agreement.
(b) Indemnification of the Fund. PFPC agrees to defend, indemnify and
hold the Fund and its officers, directors and employees harmless
from any and all Claims arising directly or indirectly from the
negligence, bad faith or willful misfeasance of PFPC in the
performance of its duties hereunder. Notwithstanding the
foregoing, the Fund shall not be indemnified against any Claim
caused by the Fund's or the Fund's other service providers'
willful misfeasance, bad faith or negligence.
(c) Indemnification Procedure.
(i) Notice of the Action. A party that seeks indemnification
under this Agreement must promptly give the other party
notice of any legal action; provided, however, that a delay
in notice does not relieve an indemnifying party of any
liability to an indemnified party, except to the extent the
indemnifying party shows that the delay prejudiced the
defense of the action.
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(ii) Participating in or Assuming the Defense. The indemnifying
party may participate in the defense at any time or it may
assume the defense by giving notice to the other party.
After assuming the defense, the indemnifying party:
(1) must select an attorney that is satisfactory to the
other party;
(2) is not liable to the other party for any later
attorney's fees or for any other later expenses that
the other party incurs, except for reasonable
investigation costs;
(3) must not compromise or settle the action without the
other party's consent (but the other party must not
unreasonably withhold its consent); and
(4) is not liable for any compromise or settlement made
without its consent.
(iii) Failing to Assume the Defense. If the indemnifying party
fails to participate in or assume the defense within 15
days after receiving notice of the action, the indemnifying
party is bound by any determination made in the action or
by any compromise or settlement made by the other party.
13. RESPONSIBILITY OF PFPC TRUST.
(a) PFPC Trust shall be under no duty to take any action hereunder on
behalf of the Fund except as specifically set forth herein or as
may be specifically agreed to by PFPC Trust and the Fund in a
written amendment hereto. PFPC Trust shall be obligated to
exercise commercially reasonable care and diligence in the
performance of its duties hereunder and to act in good faith in
performing services provided for under this Agreement. PFPC Trust
shall be liable only for any damages arising out of PFPC Trust's
failure to perform its duties under this Agreement to the extent
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such damages arise out of PFPC Trust's willful misfeasance, bad
faith, negligence or reckless disregard of its duties under this
Agreement.
(b) Notwithstanding anything in this Agreement to the contrary, (i)
PFPC Trust shall not be liable for losses, delays, failure,
errors, interruption or loss of data occurring directly or
indirectly by reason of circumstances beyond its reasonable
control, including without limitation acts of God; action or
inaction of civil or military authority; public enemy; war;
terrorism; riot; fire; flood; sabotage; epidemics; labor
disputes; civil commotion; interruption, loss or malfunction of
utilities, transportation, computer or communications
capabilities; insurrection; elements of nature; or
non-performance by a third party; and (ii) PFPC Trust shall not
be under any duty or obligation to inquire into and shall not be
liable for the validity or invalidity, authority or lack thereof,
or truthfulness or accuracy or lack thereof, of any instruction,
direction, notice, instrument or other information which PFPC
Trust reasonably believes to be genuine.
(c) Notwithstanding anything in this Agreement to the contrary,
neither PFPC Trust nor its affiliates shall be liable for any
consequential, special or indirect losses or damages, whether or
not the likelihood of such losses or damages was known by PFPC
Trust or its affiliates.
(d) Each party shall have a duty to mitigate damages for which the
other party may become responsible.
(e) Notwithstanding anything in this Agreement to the contrary (other
than as specifically provided in Section 15(h)(ii)(B)(4) and
Section 15(h)(iii)(A) of this Agreement), the Fund shall be
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responsible for all filings, tax returns and reports on any
transactions undertaken pursuant to this Agreement, or in respect
of the Property or any collections undertaken pursuant to this
Agreement, which may be requested by any relevant authority. In
addition, the Fund shall be responsible for the payment of all
taxes and similar items (including without limitation penalties
and interest related thereto).
(f) The provisions of this Section 13 shall survive termination of
this Agreement.
14. DESCRIPTION OF SERVICES.
(a) Delivery of the Property. The Fund will deliver or arrange for
delivery to PFPC Trust, all the Property owned by the Fund,
including cash received as a result of the distribution of
Shares, during the term of this Agreement. PFPC Trust will not be
responsible for such property until actual receipt.
(b) Receipt and Disbursement of Money. PFPC Trust, acting upon
Written Instructions, shall open and maintain separate accounts
in the Fund's name using all cash received from or for the
account of the Fund, subject to the terms of this Agreement.
PFPC Trust shall make cash payments from or for the Account of
the Fund only for:
(i) purchases of securities in the name of the Fund, PFPC
Trust, PFPC Trust's nominee or a sub-custodian or nominee
thereof as provided in sub-section (j) and for which PFPC
Trust has received a copy of the broker's or dealer's
confirmation or payee's invoice, as appropriate;
(ii) purchase or redemption of Shares of the Fund delivered to
PFPC Trust;
(iii) payment of, subject to Written Instructions, interest,
taxes (provided that tax which PFPC Trust considers is
required to be deducted or withheld "at source" will be
governed by Section 15(h)(iii)(B) of this Agreement),
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administration, accounting, distribution, advisory, license
and management fees which are to be borne by the Fund;
(iv) payment to, subject to receipt of Written Instructions, the
Fund's transfer agent, as agent for the shareholders, of an
amount equal to the amount of dividends and distributions
stated in the Written Instructions to be distributed in
cash by the transfer agent to shareholders, or, in lieu of
paying the Fund's transfer agent, PFPC Trust may arrange
for the direct payment of cash dividends and distributions
to shareholders in accordance with procedures mutually
agreed upon from time to time by and among the Fund, PFPC
Trust and the Fund's transfer agent;
(v) payments, upon receipt of Written Instructions, in
connection with the conversion, exchange or surrender of
securities owned or subscribed to by the Fund and held by
or delivered to PFPC Trust;
(vi) payments of the amounts of dividends received with respect
to securities sold short;
(vii) payments to PFPC Trust for its services hereunder;
(viii) payments to a sub-custodian pursuant to provisions in
sub-section (c) of this Section; and
(ix) other payments, upon Written Instructions.
PFPC Trust is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received as custodian
for the Account.
(c) Receipt of Securities; Subcustodians.
(i) PFPC Trust shall hold all securities received by it for the
Account in a separate account that physically segregates
such securities from those of any other persons, firms or
corporations, except for securities held in a Book-Entry
System or through a sub-custodian or depository. All such
securities shall be held or disposed of only upon Written
Instructions of the Fund pursuant to the terms of this
Agreement. PFPC Trust shall have no power or authority to
assign, hypothecate, pledge or otherwise dispose of any
such securities or investment, except upon the express
terms of this Agreement or upon Written Instructions
authorizing the transaction. In no case may any member of
the Fund's board of directors, or any officer, employee or
agent of the Fund withdraw any securities.
At PFPC Trust's own expense and for its own convenience,
PFPC Trust may enter into sub-custodian agreements with
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other banks or trust companies to perform duties described
in this sub-section (c) with respect to domestic assets.
Such bank or trust company shall have an aggregate capital,
surplus and undivided profits, according to its last
published report, of at least one million dollars
($1,000,000), if it is a subsidiary or affiliate of PFPC
Trust, or at least twenty million dollars ($20,000,000) if
such bank or trust company is not a subsidiary or affiliate
of PFPC Trust. In addition, such bank or trust company must
be qualified to act as custodian and agree to comply with
the relevant provisions of applicable rules and
regulations. Any such arrangement will not be entered into
without prior written notice to the Fund (or as otherwise
provided in the 1940 Act).
In addition, PFPC Trust may enter into arrangements with
sub-custodians with respect to services regarding foreign
assets. Any such arrangement will not be entered into
without prior written notice to the Fund (or as otherwise
provided in the 1940 Act).
PFPC Trust shall remain responsible for the acts and
omissions of any sub-custodian chosen by PFPC Trust under
the terms of this sub-section (c) to the same extent that
PFPC Trust is responsible for its own acts and omissions
under this Agreement.
(d) Transactions Requiring Instructions. Upon receipt of Oral
Instructions or Written Instructions and not otherwise, PFPC
Trust shall:
(i) deliver any securities held for the Fund against the
receipt of payment for the sale of such securities or
otherwise in accordance with standard market practice;
(ii) execute and deliver to such persons as may be designated
in such Oral Instructions or Written Instructions,
proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as owner of
any securities may be exercised;
(iii) deliver any securities to the issuer thereof, or its
agent, when such securities are called, redeemed, retired
or otherwise become payable at the option of the holder;
provided that, in any such case, the cash or other
consideration is to be delivered to PFPC Trust;
(iv) deliver any securities held for the Fund against receipt
of other securities or cash issued or paid in connection
with the liquidation, reorganization, refinancing, tender
offer, merger, consolidation or recapitalization of any
corporation, or the exercise of any conversion privilege;
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(v) deliver any securities held for the Fund to any
protective committee, reorganization committee or other
person in connection with the reorganization,
refinancing, merger, consolidation, recapitalization or
sale of assets of any corporation, and receive and hold
under the terms of this Agreement such certificates of
deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such
delivery;
(vi) make such transfer or exchanges of the assets of the Fund
and take such other steps as shall be stated in said Oral
Instructions or Written Instructions to be for the
purpose of effectuating a duly authorized plan of
liquidation, reorganization, merger, consolidation or
recapitalization of the Fund;
(vii) release securities belonging to the Fund to any bank or
trust company for the purpose of a pledge or
hypothecation to secure any loan incurred by the Fund;
provided, however, that securities shall be released only
upon payment to PFPC Trust of the monies borrowed, except
that in cases where additional collateral is required to
secure a borrowing already made subject to proper prior
authorization, further securities may be released for
that purpose; and repay such loan upon redelivery to it
of the securities pledged or hypothecated therefor and
upon surrender of the note or notes evidencing the loan;
(viii) release and deliver securities owned by the Fund in
connection with any repurchase agreement entered into by
the Fund, but only on receipt of payment therefor; and
pay out monies of the Fund in connection with such
repurchase agreements, but only upon the delivery of the
securities;
(ix) release and deliver or exchange securities owned by the
Fund in connection with any conversion of such
securities, pursuant to their terms, into other
securities;
(x) release and deliver securities to a broker in connection
with the broker's custody of margin collateral relating
to futures and options transactions;
(xi) release and deliver securities owned by the Fund for the
purpose of redeeming in kind shares of the Fund upon
delivery thereof to PFPC Trust; and
(xii) release and deliver or exchange securities owned by the
Fund for other purposes.
PFPC Trust must also receive a certified resolution
describing the nature of the corporate purpose and
the name and address of the person(s) to whom delivery
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shall be made when such action is pursuant to
sub-paragraph d(xii).
(e) Use of Book-Entry System or Other Depository. PFPC Trust is
authorized and instructed, on a continuous basis, to deposit in
Book-Entry Systems and other depositories all securities
belonging to the Fund eligible for deposit therein and to utilize
Book-Entry Systems and other depositories to the extent possible
in connection with settlements of purchases and sales of
securities by the Fund, and deliveries and returns of securities
loaned, subject to repurchase agreements or used as collateral in
connection with borrowings. PFPC Trust shall continue to perform
such duties until it receives Written Instructions or Oral
Instructions authorizing contrary actions. Notwithstanding
anything in this Agreement to the contrary, PFPC Trust's use of a
Book-Entry System shall comply with the requirements of Rule
17f-4 under the 1940 Act.
PFPC Trust shall administer a Book-Entry System or other depository as
follows:
(i) With respect to securities of the Fund which are maintained
in a Book-Entry System or another depository, the records
of PFPC Trust shall identify by book-entry or otherwise
those securities belonging to the Fund.
(ii) Assets of the Fund deposited in a Book-Entry System or
another depository will (to the extent consistent with
applicable law and standard practice) at all times be
segregated from any assets and cash controlled by PFPC
Trust in other than a fiduciary or custodian capacity but
may be commingled with other assets held in such
capacities.
PFPC Trust will provide the Fund with such reports on its own
system of internal control as the Fund may reasonably request
from time to time.
(f) Registration of Securities. All securities held for the Fund
which are issued or issuable only in bearer form, except such
securities held in the Book-Entry System or in another
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depository, shall be held by PFPC Trust in bearer form; all other
securities held for the Fund may be registered in the name of the
Fund, PFPC Trust, a Book-Entry System, another depository, a
sub-custodian, or any duly appointed nominee of the Fund, PFPC
Trust, Book-Entry System, depository or sub-custodian. The Fund
reserves the right to instruct PFPC Trust as to the method of
registration and safekeeping of the securities of the Fund. The
Fund agrees to furnish to PFPC Trust appropriate instruments to
enable PFPC Trust to hold or deliver in proper form for transfer,
or to register in the name of its nominee or in the name of the
Book-Entry System or in the name of another appropriate entity,
any securities which it may hold for the Account.
(g) Voting and Other Action. Neither PFPC Trust nor its nominee shall
vote any of the securities held pursuant to this Agreement by or
for the account of the Fund, except in accordance with Written
Instructions. PFPC Trust, directly or through the use of another
entity, shall execute in blank and promptly deliver all notices,
proxies and proxy soliciting materials received by PFPC Trust as
custodian of the Property to the registered holder of such
securities. If the registered holder is not the Fund, then
Written Instructions or Oral Instructions must designate the
person who owns such securities.
(h) Transactions Not Requiring Instructions. In the absence of
contrary Written Instructions, PFPC Trust is authorized to take
the following actions:
(i) Collection of Income and Other Payments.
(A) collect and receive for the account of the Fund, all
income, dividends, distributions, coupons, option
premiums, other payments and similar items, included
or to be included in the Property, and, in addition,
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promptly advise the Fund of such receipt and credit
such income to the Fund's custodian account;
(B) endorse and deposit for collection, in the name of
the Fund, checks, drafts, or other orders for the
payment of money;
(C) receive and hold for the account of the Fund all
securities received as a distribution on the Fund's
securities as a result of a stock dividend, share
split-up or reorganization, recapitalization,
readjustment or other rearrangement or distribution
of rights or similar securities issued with respect
to any securities belonging to the Fund and held by
PFPC Trust hereunder;
(D) present for payment and collect the amount payable
upon all securities which may mature or be called,
redeemed, retired or otherwise become payable (on a
mandatory basis) on the date such securities become
payable; and
(E) take any action which may be necessary and proper in
connection with the collection and receipt of such
income and other payments and the endorsement for
collection of checks, drafts, and other negotiable
instruments.
(ii) Miscellaneous Transactions.
(A) PFPC Trust is authorized to deliver or cause to be
delivered Property against payment or other
consideration or written receipt therefor in the
following cases:
(1) for examination by a broker or dealer selling
for the account of the Fund in accordance with
street delivery custom;
(2) for the exchange of interim receipts or
temporary securities for definitive securities;
and
(3) for transfer of securities into the name of the
Fund or PFPC Trust or a sub-custodian or a
nominee of one of the foregoing, or for
exchange of securities for a different number
of bonds, certificates, or other evidence,
representing the same aggregate face amount or
number of units bearing the same interest rate,
maturity date and call provisions, if any;
provided that, in any such case, the new
securities are to be delivered to PFPC Trust.
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(B) unless and until PFPC Trust receives Oral
Instructions or Written Instructions to the contrary,
PFPC Trust shall:
(1) pay all income items held by it which call for
payment upon presentation and hold the cash
received by it upon such payment for the
account of the Fund;
(2) collect interest and cash dividends received,
with notice to the Fund, to the account of the
Fund;
(3) hold for the account of the Fund all stock
dividends, rights and similar securities issued
with respect to any securities held by PFPC
Trust; and
(4) subject to receipt of such documentation and
information as PFPC Trust may request, execute
as agent on behalf of the Fund all necessary
ownership certificates required by a national
governmental taxing authority or under the laws
of any U.S. state now or hereafter in effect,
inserting the Fund's name on such certificate
as the owner of the securities covered thereby,
to the extent it may lawfully do so.
(iii) Other Matters.
(A) subject to receipt of such documentation and
information as PFPC Trust may request, PFPC Trust
will, in such jurisdictions as PFPC Trust may agree
from time to time, seek to reclaim or obtain a
reduction with respect to any withholdings or other
taxes relating to assets maintained hereunder
(provided that PFPC Trust will not be liable for
failure to obtain any particular relief in a
particular jurisdiction); and
(B) PFPC Trust is authorized to deduct or withhold any
sum in respect of tax which PFPC Trust considers is
required to be deducted or withheld "at source" by
any relevant law or practice.
(i) Segregated Accounts.
(i) PFPC Trust shall upon receipt of Written Instructions or
Oral Instructions establish and maintain segregated
accounts on its records for and on behalf of the Fund. Such
accounts may be used to transfer cash and securities,
including securities in a Book-Entry System or other
depository:
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(A) for the purposes of compliance by the Fund with the
procedures required by a securities or option
exchange, providing such procedures comply with the
1940 Act and any releases of the SEC relating to the
maintenance of segregated accounts by registered
investment companies; and
(B) upon receipt of Written Instructions, for other
purposes.
(ii) PFPC Trust shall arrange for the establishment of XXX
custodian accounts for such shareholders holding Shares
through XXX accounts, in accordance with the Fund's
prospectuses, the Internal Revenue Code of 1986, as amended
(including regulations promulgated thereunder), and with
such other procedures as are mutually agreed upon from time
to time by and among the Fund, PFPC Trust and the Fund's
transfer agent.
(j) Purchases of Securities. PFPC Trust shall settle purchased
securities upon receipt of Oral Instructions or Written
Instructions that specify:
(i) the name of the issuer and the title of the securities,
including CUSIP number if applicable;
(ii) the number of shares or the principal amount purchased and
accrued interest, if any;
(iii) the date of purchase and settlement;
(iv) the purchase price per unit;
(v) the total amount payable upon such purchase; and
(vi) the name of the person from whom or the broker through whom
the purchase was made. PFPC Trust shall upon receipt of
securities purchased by or for the Fund (or otherwise in
accordance with standard market practice) pay out of the
monies held for the account of the Fund the total amount
payable to the person from whom or the broker through whom
the purchase was made, provided that the same conforms to
the total amount payable as set forth in such Oral
Instructions or Written Instructions.
(k) Sales of Securities. PFPC Trust shall settle sold securities upon
receipt of Oral Instructions or Written Instructions that
specify:
(i) the name of the issuer and the title of the security,
including CUSIP number if applicable;
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(ii) the number of shares or principal amount sold, and accrued
interest, if any;
(iii) the date of trade and settlement;
(iv) the sale price per unit;
(v) the total amount payable to the Fund upon such sale;
(vi) the name of the broker through whom or the person to whom
the sale was made; and
(vii) the location to which the security must be delivered and
delivery deadline, if any.
PFPC Trust shall deliver the securities upon receipt of the total
amount payable to the Fund upon such sale, provided that the total
amount payable is the same as was set forth in the Oral Instructions or
Written Instructions. Notwithstanding the other provisions thereof,
PFPC Trust may accept payment in such form as is consistent with
standard industry practice and may deliver securities and arrange for
payment in accordance with the customs prevailing among dealers in
securities.
(l) Reports; Proxy Materials.
(i) PFPC Trust shall furnish to the Fund the following reports:
(A) such periodic and special reports as the Fund may
reasonably request;
(B) a monthly statement summarizing all transactions and
entries for the account of the Fund, listing each
portfolio security belonging to the Fund (with the
corresponding security identification number) held at
the end of such month and stating the cash balance of
the Fund at the end of such month.
(C) the reports required to be furnished to the Fund
pursuant to Rule 17f-4 of the 1940 Act; and
(D) such other information as may be agreed upon from
time to time between the Fund and PFPC Trust.
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(ii) PFPC Trust shall transmit promptly to the Fund any proxy
statement, proxy material, notice of a call or conversion
or similar communication received by it as custodian of the
Property. PFPC Trust shall be under no other obligation to
inform the Fund as to such actions or events. For
clarification, upon termination of this Agreement PFPC
Trust shall have no responsibility to transmit such
material or to inform the Fund or any other person of such
actions or events.
(m) Crediting of Accounts. PFPC Trust may in its sole discretion
credit an Account with respect to income, dividends,
distributions, coupons, option premiums, other payments or
similar items prior to PFPC Trust's actual receipt thereof, and
in addition PFPC Trust may in its sole discretion credit or debit
the assets in an Account on a contractual settlement date with
respect to any sale, exchange or purchase applicable to the
Account; provided that nothing herein or otherwise shall require
PFPC Trust to make any advances or to credit any amounts until
PFPC Trust's actual receipt thereof. If PFPC Trust in its sole
discretion credits an Account with respect to (a) income,
dividends, distributions, coupons, option premiums, other
payments or similar items on a contractual payment date or
otherwise in advance of PFPC Trust's actual receipt of the amount
due, (b) the proceeds of any sale or other disposition of assets
on the contractual settlement date or otherwise in advance of
PFPC Trust's actual receipt of the amount due or (c) provisional
crediting of any amounts due, and (i) PFPC Trust is subsequently
unable to collect full and final payment for the amounts so
credited within a reasonable time period using reasonable efforts
Page 22
or (ii) pursuant to standard industry practice, law or regulation
PFPC Trust is required to repay to a third party such amounts so
credited, or if any Property has been incorrectly credited, PFPC
Trust shall have the absolute right in its sole discretion
without demand to reverse any such credit or payment, to debit or
deduct the amount of such credit or payment from the Account, and
to otherwise pursue recovery of any such amounts so credited from
the Fund. The Fund hereby grants to PFPC Trust and to each
sub-custodian utilized by PFPC Trust in connection with providing
services to the Fund a first priority contractual possessory
security interest in and a right of setoff against the assets
maintained in an Account hereunder in the amount necessary to
secure the return and payment to PFPC Trust and to each such
sub-custodian of any advance or credit made by PFPC Trust and/or
by such sub-custodian (including charges related thereto) to such
Account. Notwithstanding anything in this Agreement to the
contrary, PFPC Trust shall be entitled to assign any rights it
has under this sub-section (m) to any sub-custodian utilized by
PFPC Trust in connection with providing services to the Fund
which sub-custodian makes any credits or advances with respect to
the Fund.
(n) Collections. All collections of monies or other property in
respect, or which are to become part, of the Property (but not
the safekeeping thereof upon receipt by PFPC Trust) shall be at
the sole risk of the Fund. If payment is not received by PFPC
Trust within a reasonable time after proper demands have been
made, PFPC Trust shall notify the Fund in writing, including
copies of all demand letters, any written responses and memoranda
of all oral responses and shall await instructions from the Fund.
Page 23
PFPC Trust shall not be obliged to take legal action for
collection unless and until reasonably indemnified to its
satisfaction. PFPC Trust shall also notify the Fund as soon as
reasonably practicable whenever income due on securities is not
collected in due course and shall provide the Fund with periodic
status reports of such income collected after a reasonable time.
(o) Excess Cash Sweep. PFPC Trust will, consistent with applicable
law, sweep any net excess cash balances daily into an investment
vehicle or other instrument designated in writing by the Fund, so
long as the investment vehicle or instrument is acceptable to
PFPC Trust, subject to a fee, paid to PFPC Trust for such
service, to be agreed between the parties. Such investment
vehicle or instrument may be offered by an affiliate of PFPC
Trust or by a PFPC Trust client and PFPC Trust may receive
compensation therefrom.
(p) Foreign Exchange.
PFPC Trust and/or sub-custodians may enter into or arrange
foreign exchange transactions (at such rates as they may
consider appropriate) in order to facilitate transactions
under this Agreement, and such entities and/or their
affiliates may receive compensation in connection with such
foreign exchange transactions.
15. DURATION AND TERMINATION.
(a) This Agreement shall be effective on the date first written above
and shall continue until June 12, 2008 (the "Initial Term").
(b) Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of one (1) year
("Renewal Terms") each, unless the Fund or PFPC provides written
notice to the other of its intent not to renew. Such notice must
Page 24
be received not less than ninety (90) days prior to the
expiration of the Initial Term or the then current Renewal Term.
(c) If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other
party (the "Non-Defaulting Party") may give written notice
thereof to the Defaulting Party, and if such material breach
shall not have been remedied within thirty (30) days after such
written notice is given, then the Non-Defaulting Party may
terminate this Agreement by giving thirty (30) days written
notice of such termination to the Defaulting Party. In all cases,
termination by the Non-Defaulting Party shall not constitute a
waiver by the Non-Defaulting Party of any other rights it might
have under this Agreement or otherwise against the Defaulting
Party.
In the event this Agreement is terminated (pending appointment of
a successor to PFPC Trust or vote of the shareholders of the Fund
to dissolve or to function without a custodian of its cash,
securities or other property), PFPC Trust shall not deliver cash,
securities or other property of the Fund to the Fund. It may
deliver them to a bank or trust company of PFPC Trust's choice,
having an aggregate capital, surplus and undivided profits, as
shown by its last published report, of not less than twenty
million dollars ($20,000,000), as a custodian for the Fund to be
held under terms similar to those of this Agreement. PFPC Trust
shall not be required to make any delivery or payment of assets
upon termination until full payment shall have been made to PFPC
Trust of all of its fees, compensation, costs and expenses (such
expenses include, without limitation, expenses associated with
movement (or duplication) of records and materials and conversion
Page 25
thereof to a successor service provider, or to a bank or trust
company pending appointment of such successor, and all trailing
expenses incurred by PFPC Trust). PFPC Trust shall have a
security interest in and shall have a right of setoff against the
Property as security for the payment of such fees, compensation,
costs and expenses.
16. NOTICES. Notices shall be addressed (a) if to PFPC Trust at 0000
Xxxxxxx Xxxxxxxxx, 0xx Xxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000,
Attention: Xxx Xxxxxxxx (or such other address as PFPC Trust may inform
the Fund in writing); (b) if to the Fund, at 0000 Xxxxxxxxxxx Xxxx,
Xxxxx, XX 00000, Attention: W. Xxxxx Xxxxxxx; or (c) if to neither of
the foregoing, at such other address as shall have been given by like
notice to the sender of any such notice or other communication by the
other party. If notice is sent by confirming electronic, hand or
facsimile sending device, it shall be deemed to have been given
immediately. If notice is sent by first-class mail, it shall be deemed
to have been given five days after it has been mailed. If notice is
sent by messenger, it shall be deemed to have been given on the day it
is delivered.
17. AMENDMENTS. This Agreement, or any term hereof, may be changed or
waived only by a written amendment, signed by the party against whom
enforcement of such change or waiver is sought.
18. DELEGATION; ASSIGNMENT. PFPC Trust may assign its rights and delegate
its duties hereunder to any affiliate of PFPC Trust or of The PNC
Financial Services Group, Inc., provided that PFPC Trust gives the Fund
30 days' prior written notice of such assignment or delegation.
19. COUNTERPARTS. This Agreement may be executed in two or more
Page 26
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
20. MISCELLANEOUS.
(a) Entire Agreement. This Agreement embodies the entire agreement
and understanding between the parties and supersedes all prior
agreements and understandings relating to the subject matter
hereof, provided that the parties may embody in one or more
separate documents their agreement, if any, with respect to
delegated duties.
(b) No Representations or Warranties. Except as expressly provided in
this Agreement, PFPC Trust hereby disclaims all representations
and warranties, express or implied, made to the Fund or any other
person, including, without limitation, any warranties regarding
quality, suitability, merchantability, fitness for a particular
purpose or otherwise (irrespective of any course of dealing,
custom or usage of trade), of any services or any goods provided
incidental to services provided under this Agreement. PFPC Trust
disclaims any warranty of title or non-infringement except as
otherwise set forth in this Agreement.
(c) No Changes that Materially Affect Obligations. Notwithstanding
anything in this Agreement to the contrary, the Fund agrees not
to make any modifications to its registration statement or adopt
any policies which would affect materially the obligations or
responsibilities of PFPC Trust hereunder without the prior
written approval of PFPC Trust, which approval shall not be
unreasonably withheld or delayed.
(d) Captions. The captions in this Agreement are included for
Page 27
convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction
or effect.
(e) Information. The Fund will provide such information and
documentation as PFPC Trust may reasonably request in connection
with services provided by PFPC Trust to the Fund.
(f) Governing Law. This Agreement shall be deemed to be a contract
made in Delaware and governed by Delaware law, without regard to
principles of conflicts of law.
(g) Partial Invalidity. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
(h) Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
(i) Facsimile Signatures. The facsimile signature of any party to
this Agreement shall constitute the valid and binding execution
hereof by such party.
(j) The Fund and PFPC Trust agree that the obligations of the Fund
under the Agreement shall not be binding upon any of the
directors, shareholders, nominees, officers, employees or agents,
whether past, present or future, of the Fund individually, but
are binding only upon the assets and property of the Fund (or
applicable series thereof), as provided in the Declaration of
Trust. The execution and delivery of this Agreement have been
authorized by the directors of the Fund, and signed by an
authorized officer of the Fund, acting as such, and neither such
Page 28
authorization by such directors nor such execution and delivery
by such officer shall be deemed to have been made by any of them
or any shareholder of the Fund individually or to impose any
liability on any of them or any shareholder of the Fund
personally, but shall bind only the assets and property of the
Fund (or applicable series thereof), as provided in the Articles
of Incorporation or Declaration of Trust.
(k) Customer Identification Program Notice. To help the U.S.
government fight the funding of terrorism and money laundering
activities, U.S. Federal law requires each financial institution
to obtain, verify, and record certain information that identifies
each person who initially opens an account with that financial
institution on or after October 1, 2003. Consistent with this
requirement, PFPC Trust may request (or may have already
requested) the Fund's name, address and taxpayer identification
number or other government-issued identification number, and, if
such party is a natural person, that party's date of birth. PFPC
Trust may also ask (and may have already asked) for additional
identifying information, and PFPC Trust may take steps (and may
have already taken steps) to verify the authenticity and accuracy
of these data elements.
Page 29
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC TRUST COMPANY
By: _______________________
Name: Xxxxxx X. Xxxxx, III
Title: Vice President
FIRST TRUST/FIDAC MORTGAGE INCOME FUND
By: _______________________
Name: _______________________
Title: _______________________
Page 30
