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Exhibit (g)
CUSTODIAN AGREEMENT
AGREEMENT made as of this 12th day of October, 1999, between Commonfund
Institutional Funds, a business trust organized under the laws of the state of
Delaware (the "Company"), and INVESTORS BANK & TRUST COMPANY, a Massachusetts
trust company (the "Bank").
The Company, an open-end management investment company, on behalf of
the portfolios/series listed on Appendix A hereto (as such Appendix A may be
amended from time to time) (each a "Fund" and collectively, the "Funds"),
desires to place and maintain all of its portfolio securities and cash in the
custody of the Bank. The Bank has at least the minimum qualifications required
by Section 17(f)(1) of the Investment Company Act of 1940 (the "1940 Act") to
act as custodian of the portfolio securities and cash of the Company, 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 Company 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. For the services rendered pursuant to this
Agreement the Company agrees to pay to the Bank the fees set forth on Appendix B
hereto.
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 Company 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 Company.
2.3 Security. The term security as used herein will have the same
meaning assigned to such term in the Securities Act of 1933, as amended,
including, without limitation, any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any profit
sharing agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil,
gas, or other mineral rights, any put, call, straddle, option, or privilege on
any security, certificate of deposit, or group or index of securities (including
any interest therein or based on the value thereof), or any put, call, straddle,
option, or privilege entered into on a national securities exchange relating to
a foreign currency, or, in general, any interest or instrument commonly known as
a "security", or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, guarantee of, or warrant or right to
subscribe to, or option contract to purchase or sell any of the foregoing, and
futures, forward contracts and options thereon.
2.4 Portfolio Security. Portfolio Security will mean any security
owned by the Company.
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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 Company.
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 ("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 an Authorized Person,
such instructions to be given in such form and manner as the Bank and the
Company shall agree upon from time to time, and (ii) instructions (which may be
continuing instructions) regarding other matters signed or initialed by an
Authorized Person. Oral instructions will be considered Proper Instructions if
the Bank reasonably believes them to have been given by an Authorized Person.
The Company 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 make
reasonable efforts to detect any discrepancy between the original instruction
and such confirmation and to report such discrepancy to the Company. The Company
shall be responsible, at the Company'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 Company shall give the Bank
specific Proper Instructions as to the action required. Upon receipt by the Bank
of an Officers' Certificate as to the authorization by the Board accompanied by
a detailed description of procedures approved by the Company, Proper
Instructions may include communication effected directly between
electro-mechanical or electronic devices provided that the Board and the Bank
agree in writing that such procedures afford adequate safeguards for the
Company's assets.
3. Separate Accounts. If the Company has more than one Fund, the Bank
will segregate the assets of each Fund to which this Agreement relates into a
separate account for each such Fund containing the assets of such Fund (and all
investment earnings thereon). Unless the context otherwise requires, any
reference in this Agreement to any actions to be taken by the Company shall be
deemed to refer to the Company acting on behalf of one or more of its series,
any reference in this Agreement to any assets of the Company, 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 Company shall be deemed to refer to duties and
obligations with respect to such individual series and any obligation or
liability of the Company hereunder shall be binding only with respect to such
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 Company 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
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Persons and (ii) the names of the members of the Board, it being understood that
upon the occurrence of any change in the information set forth in the most
recent certification on file (including without limitation any person named in
the most recent certification who is no longer an Authorized Person as
designated therein), the Secretary or Assistant Secretary of the Company 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 Company which has been
signed by Authorized Persons named in the most recent certification received by
the Bank.
5. Custody of Cash. As custodian for the Company, the Bank will open
and maintain a separate account or accounts in the name of the Company or in the
name of the Bank, as Custodian of the Company, and will deposit to the account
of the Company all of the cash of the Company, except for cash held by a
subcustodian appointed pursuant to Sections 14.2 or 14.3 hereof, including
borrowed funds, delivered to the Bank, subject only to draft or order by the
Bank acting pursuant to the terms of this Agreement. Pursuant to the Bank's
internal policies regarding the management of cash accounts, the Bank may
segregate that portion of the cash of the Company that the Company wishes to
place under interest bearing deposit arrangements with the Bank into a separate
savings deposit account upon which the Bank reserves the right to require seven
(7) days notice prior to withdrawal of cash from the account. 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 Company, notification from the Company'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 Company, 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
Company, against contemporaneous receipt of such securities by the Bank or
against delivery of such securities to the Bank in accordance with generally
accepted settlement practices and customs in the jurisdiction or market in which
the transaction occurs registered in the name of the Company or in the name of,
or properly endorsed and in form for transfer to, the Bank, or a nominee of the
Bank, or receipt for the account of the Bank pursuant to the provisions of
Section 6 below, each such payment to be made at the purchase price shown on a
broker's confirmation (or transaction report in the case of Book Entry Paper (as
that term is defined in Section 6.6 hereof)) of purchase of the securities
received by the Bank before such payment is made, as confirmed in the Proper
Instructions received by the Bank before such payment is made.
5.2 Redemptions. In such amount as may be necessary for the
repurchase or redemption of common shares of the Company offered for repurchase
or redemption in accordance with Section 7 of this Agreement.
5.3 Distributions and Expenses of Company. For the payment on the
account of the Company of dividends or other distributions to shareholders as
may from time to time be declared by the Board, interest, taxes, management or
supervisory fees, distribution fees, fees of the Bank for its services hereunder
and reimbursement of the expenses and liabilities of the Bank as provided
hereunder, fees of any transfer agent, fees for legal, accounting, and auditing
services, or other operating expenses of the Company.
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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 Company held by or to be delivered to the Bank.
5.5 Repayment of Loans. To repay loans of money made to the Company,
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 Company
for the purpose of collateralizing the obligation to return to the Company
certificates borrowed from the Company representing Portfolio Securities, but
only upon redelivery to the Bank of such borrowed certificates.
5.7 Foreign Exchange Transactions.
(a) For payments in connection with foreign exchange contracts
or options to purchase and sell foreign currencies for spot and future delivery
(collectively, "Foreign Exchange Agreements") which may be entered into by the
Bank on behalf of the Company 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 Company deals or for their failure to comply with
the terms of any contract or option.
(b) In order to secure any payments in connection with Foreign
Exchange Agreements which may be entered into by the Bank pursuant to Proper
Instructions, the Company agrees that the Bank shall have a continuing lien and
security interest, to the extent of any payment due under any Foreign Exchange
Agreement, in and to any property at any time held by the Bank for the Company's
benefit or in which the Company 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 Company authorizes the Bank, in the Bank's sole
discretion, at any time to charge any such payment due under any Foreign
Exchange Agreement against any balance of account standing to the credit of the
Company on the Bank's books.
5.8 Other Authorized Payments. For other authorized transactions of
the Company, or other obligations of the Company incurred for proper Company
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 Company,
or specifying the amount of the obligation for which payment is to be made,
setting forth the purpose for which such obligation was incurred and declaring
such purpose to be a proper corporate purpose.
5.9 Termination: Upon the termination of this Agreement as
hereinafter set forth pursuant to Section 8 and Section 16 of this Agreement.
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 Sections 14.2 or 14.3 hereof,
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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 Company. All such
Portfolio Securities will be held or disposed of by the Bank for, and subject at
all times to, the instructions of the Company 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 Company 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 Company.
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 Company all notices,
proxies and proxy soliciting materials delivered to the Bank with respect to
such Securities, such proxies to be executed by the registered holder of such
Securities (if registered otherwise than in the name of the Company), but
without indicating the manner in which such proxies are to be voted.
6.3 Corporate Action. If at any time the Bank is notified that an
issuer of any Portfolio Security has taken or intends to take a corporate action
(a "Corporate Action") that affects the rights, privileges, powers, preferences,
qualifications or ownership of a Portfolio Security, including without
limitation, liquidation, consolidation, merger, recapitalization,
reorganization, reclassification, subdivision, combination, stock split or stock
dividend, which Corporate Action requires an affirmative response or action on
the part of the holder of such Portfolio Security (a "Response"), the Bank shall
notify the Company promptly of the Corporate Action, the Response required in
connection with the Corporate Action and the Bank's deadline for receipt from
the Company of Proper Instructions regarding the Response (the "Response
Deadline"). The Bank shall forward to the Company via telecopier and/or
overnight courier all notices, information statements or other materials
relating to the Corporate Action promptly after receipt of such materials by the
Bank.
(a) The Bank shall act upon a required Response only after
receipt by the Bank of Proper Instructions from the Company no later than 5:00
p.m. on the date specified as the Response Deadline and only if the Bank (or its
agent or subcustodian hereunder) has actual possession of all necessary
Securities, consents and other materials no later than 5:00 p.m. on the date
specified as the Response Deadline.
(b) The Bank shall have no duty to act upon a required
Response if Proper Instructions relating to such Response and all necessary
Securities, consents and other materials are not received by and in the
possession of the Bank no later than 5:00 p.m. on the date specified as the
Response Deadline. Notwithstanding, the Bank may, in its sole discretion, use
its best efforts to act upon a Response for which Proper Instructions and/or
necessary Securities, consents or other materials are received by the Bank after
5:00 p.m. on the date specified as the Response Deadline, it being acknowledged
and agreed by the parties that any undertaking by the Bank to
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use its best efforts in such circumstances shall in no way create any duty upon
the Bank to complete such Response prior to its expiration.
(c) In the event that the Company notifies the Bank of a
Corporate Action requiring a Response and the Bank has received no other notice
of such Corporate Action, the Response Deadline shall be 48 hours prior to the
Response expiration time set by the depository processing such Corporate Action.
(d) Section 14.3(e) of this Agreement shall govern any
Corporate Action involving Foreign Portfolio Securities held by a Selected
Foreign Sub-Custodian.
6.4 Book-Entry System. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits of
Company assets in the Book-Entry System, and (ii) for any subsequent changes to
such arrangements following such approval, the Board has reviewed and approved
the arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may keep Portfolio Securities in the Book-Entry
System provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall not include
any assets of the Bank (or such agent) other than assets held as a fiduciary,
custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with respect
to the Company's participation in the Book-Entry System through the Bank (or any
such agent) will identify by book entry the Portfolio Securities which are
included with other securities deposited in the Account and shall at all times
during the regular business hours of the Bank (or such agent) be open for
inspection by duly authorized officers, employees or agents of the Company.
Where securities are transferred to the Company's account, the Bank shall also,
by book entry or otherwise, identify as belonging to the Company a quantity of
securities in a fungible bulk of securities (i) registered in the name of the
Bank or its nominee, or (ii) shown on the Bank's account on the books of the
Federal Reserve Bank;
(c) The Bank (or its agent) shall pay for securities purchased
for the account of the Company or shall pay cash collateral against the return
of Portfolio Securities loaned by the Company 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 Company. The Bank (or
its agent) shall transfer securities sold or loaned for the account of the
Company 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 Company 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
Company. Copies of all advices from the Book-Entry System of transfers of
securities for the account of the Company shall identify the Company, be
maintained for the Company by the Bank and shall be provided to the Company at
its request. The Bank shall send the Company a confirmation, as defined by Rule
17f-4 of the 1940 Act, of any transfers to or from the account of the Company;
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(d) The Bank will promptly provide the Company with any report
obtained by the Bank or its agent on the Book-Entry System's accounting system,
internal accounting control and procedures for safeguarding securities deposited
in the Book-Entry System;
6.5 Use of a Depository. Provided (i) the Bank has received a
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 Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive, exchange,
release, lend, deliver and otherwise deal with Portfolio Securities including
stock dividends, rights and other items of like nature, and to receive and remit
to the Bank on behalf of the Company all income and other payments thereon and
to take all steps necessary and proper in connection with the collection
thereof;
(b) Registration of Portfolio Securities may be made in the
name of any nominee or nominees used by such Depository;
(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 Company and the Company shall pay cash collateral against the return of
Portfolio Securities loaned by the Company only upon delivery of the Securities
to or for the account of the Company; and upon any sale of Portfolio Securities,
delivery of the Securities will be made only against payment therefor or, in the
event Portfolio Securities are loaned, delivery of Securities will be made only
against receipt of the initial cash collateral to or for the account of the
Company; and
(d) The Bank shall use its best efforts to provide that:
(i) The Depository obtains replacement of any certificated
Portfolio Security deposited with it in the event such Security is lost,
destroyed, wrongfully taken or otherwise not available to be returned to the
Bank upon its request;
(ii) Proxy materials received by a Depository with respect
to Portfolio Securities deposited with such Depository are forwarded immediately
to the Bank for prompt transmittal to the Company;
(iii) Such Depository promptly forwards to the Bank
confirmation of any purchase or sale of Portfolio Securities and of the
appropriate book entry made by such Depository to the Company'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 Company to comply with the
recordkeeping requirements of Section 31(a) of the 1940 Act and Rule 31(a)
thereunder; and
(v) Such Depository delivers to the Bank all internal
accounting control reports, whether or not audited by an independent public
accountant, as well as such other reports as the Company may reasonably request
in order to verify the Portfolio Securities held by such Depository.
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6.6 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 reviewed and approved the arrangements,
upon receipt of Proper Instructions and upon receipt of confirmation from an
Issuer (as defined below) that the Company has purchased such Issuer's
Book-Entry Paper, the Bank shall issue, and hold in book-entry form on behalf of
the Company, commercial paper issued by issuers with whom the Bank has entered
into a book-entry agreement (the "Issuers"). In maintaining procedures for
Book-Entry Paper, the Bank agrees that:
(a) The Bank will maintain all Book-Entry Paper held by the
Company 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 Company's
purchase of Book-Entry Paper through the Bank will identify, by book-entry,
commercial paper belonging to the Company which is included in the Book-Entry
System and shall at all times during the regular business hours of the Bank be
open for inspection by duly authorized officers, employees or agents of the
Company;
(c) The Bank shall pay for Book-Entry Paper purchased for the
account of the Company upon contemporaneous (i) receipt of advice from the
Issuer that such sale of Book-Entry Paper has been effected, and (ii) the making
of an entry on the records of the Bank to reflect such payment and transfer for
the account of the Company;
(d) The Bank shall cancel such Book-Entry Paper obligation
upon the maturity thereof upon contemporaneous (i) receipt of advice that
payment for such Book-Entry Paper has been transferred to the Company, and (ii)
the making of an entry on the records of the Bank to reflect such payment for
the account of the Company; and
(e) The Bank will send to the Company such reports on its
system of internal accounting control with respect to the Book-Entry Paper as
the Company may reasonably request from time to time.
6.7 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 Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval, the Bank shall enter into
such immobilization program with such bank acting as a subcustodian hereunder.
6.8 Eurodollar CDs. Any Portfolio Securities which are Eurodollar
CDs may be physically held by the European branch of the U.S. banking
institution that is the issuer of such Eurodollar CD (a "European Branch"),
provided that such Portfolio Securities are identified on the books of the Bank
as belonging to the Company and that the books of the Bank identify the European
Branch holding such Portfolio Securities. Notwithstanding any other provision of
this Agreement to the contrary, except as stated in the first sentence of this
subsection 6.8, the Bank shall be under no other duty with respect to such
Eurodollar CDs belonging to the Company.
6.9 Options and Futures Transactions.
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(a) Puts and Calls Traded on Securities Exchanges, NASDAQ
or Over-the-Counter.
(i) The Bank shall take action as to put options
("puts") and call options ("calls") purchased or sold (written) by the Company
regarding escrow or other arrangements (i) in accordance with the provisions of
any agreement entered into upon receipt of Proper Instructions among the Bank,
any broker-dealer registered with the National Association of Securities
Dealers, Inc. (the "NASD"), and, if necessary, the Company, 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.
(ii) Unless another agreement requires it to do so,
the Bank shall be under no duty or obligation to see that the Company 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 Company. The Bank shall have no responsibility for the
legality of any put or call purchased or sold on behalf of the Company, the
propriety of any such purchase or sale, or the adequacy of any collateral
delivered to a broker in connection with an option or deposited to or withdrawn
from a Segregated Account (as defined in subsection 6.10 below). The Bank
specifically, but not by way of limitation, shall not be under any duty or
obligation to: (i) periodically check or notify the Company that the amount of
such collateral held by a broker or held in a Segregated Account is sufficient
to protect such broker or the Company against any loss; (ii) effect the return
of any collateral delivered to a broker; or (iii) advise the Company that any
option it holds, has or is about to expire. Such duties or obligations shall be
the sole responsibility of the Company.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
(i) The Bank shall take action as to puts, calls and
futures contracts ("Futures") purchased or sold by the Company in accordance
with the provisions of any agreement entered into upon the receipt of Proper
Instructions among the Company, 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 Company.
(ii) The responsibilities of the Bank as to futures,
puts and calls traded on commodities exchanges, any Futures Commission Merchant
account and the Segregated Account shall be limited as set forth in subparagraph
(a)(ii) of this Section 6.9 as if such subparagraph referred to Futures
Commission Merchants rather than brokers, and Futures and puts and calls thereon
instead of options.
6.10 Segregated Account. The Bank shall upon receipt of Proper
Instructions establish and maintain a Segregated Account or Accounts for and on
behalf of the Company.
(a) Cash and/or Portfolio Securities may be transferred
into a Segregated Account upon receipt of Proper Instructions in the following
circumstances:
(i) in accordance with the provisions of any
agreement among the Company, the Bank and a broker-dealer registered under the
Exchange Act and a member of the
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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 Company;
(ii) for the purpose of segregating cash or securities in
connection with options purchased or written by the Company or commodity futures
purchased or written by the Company;
(iii) for the deposit of liquid assets, such as cash, U.S.
Government securities or other high grade debt obligations, having a market
value (marked to market on a daily basis) at all times equal to not less than
the aggregate purchase price due on the settlement dates of all the Company's
then outstanding forward commitment or "when-issued" agreements relating to the
purchase of Portfolio Securities and all the Company's then outstanding
commitments under reverse repurchase agreements entered into with broker-dealer
firms;
(iv) for the purposes of compliance by the Company with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of Segregated Accounts by registered investment
companies;
(v) for other proper corporate purposes, but only, in the case
of this clause (v), upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board, or of the executive committee of
the Board signed by an officer of the Company and certified by the Secretary or
an Assistant Secretary, setting forth the purpose or purposes of such Segregated
Account and declaring such purposes to be proper corporate purposes.
(b) Cash and/or Portfolio Securities may be withdrawn from a
Segregated Account pursuant to Proper Instructions in the following
circumstances:
(i) with respect to assets deposited in accordance with the
provisions of any agreements referenced in (a)(i) or (a)(ii) above, in
accordance with the provisions of such agreements;
(ii) with respect to assets deposited pursuant to (a)(iii) or
(a)(iv) above, for sale or delivery to meet the Company's obligations under
outstanding forward commitment or when-issued agreements for the purchase of
Portfolio Securities and under reverse repurchase agreements;
(iii) for exchange for other liquid assets of equal or greater
value deposited in the Segregated Account;
(iv) to the extent that the Company'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 Company's
obligations thereunder are met from assets of the Company other than those in
the Segregated Account;
(v) for delivery upon settlement of a forward commitment or
when-issued agreement for the sale of Portfolio Securities; or
11
(vi) with respect to assets deposited pursuant to (a)(v)
above, in accordance with the purposes of such account as set forth in Proper
Instructions.
6.11 Interest Bearing Call or Time Deposits. The Bank shall, upon
receipt of Proper Instructions relating to the purchase by the Company 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 Company 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 Company 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 Company.
6.12 Transfer of Securities. The Bank will transfer, exchange, deliver
or release Portfolio Securities held by it hereunder, insofar as such Securities
are available for such purpose, provided that the Bank will make a transfer,
exchange, delivery or release under this Section only upon receipt of Proper
Instructions. The Proper Instructions shall state that such transfer, exchange
or delivery is for a purpose permitted under the terms of this Section 6.12, and
shall specify the applicable subsection, or describe the purpose of the
transaction with sufficient particularity to permit the Bank to ascertain the
applicable subsection. After receipt of such Proper Instructions, the Bank will
transfer, exchange, deliver or release Portfolio Securities only in the
following circumstances:
(a) Upon sales of Portfolio Securities for the account of the
Company, against contemporaneous receipt by the Bank of payment therefor in
full, or against payment to the Bank in accordance with generally accepted
settlement practices and customs in the jurisdiction or market in which the
transaction occurs, each such payment to be in the amount of the sale price
shown in a broker's confirmation of sale received by the Bank before such
payment is made, as confirmed in the Proper Instructions received by the Bank
before such payment is made;
(b) In exchange for or upon conversion into other securities alone
or other securities and cash pursuant to any plan of merger, consolidation,
reorganization, share split-up, change in par value, recapitalization or
readjustment or otherwise, upon exercise of subscription, purchase or sale or
other similar rights represented by such Portfolio Securities, or for the
purpose of tendering shares in the event of a tender offer therefor, provided,
however, that in the event of an offer of exchange, tender offer, or other
exercise of rights requiring the physical tender or delivery of Portfolio
Securities, the Bank 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 Company upon
authorization from the Company;
(e) In the case of option contracts owned by the Company, for
presentation to the endorsing broker;
12
(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 Company
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
Company of the moneys borrowed, provided further, however, that in cases where
additional collateral is required to secure a borrowing already made, and such
fact is made to appear in the Proper Instructions, Portfolio Securities may be
released for that purpose without any such payment. In the event that any
pledged Portfolio Securities are held by the Bank, they will be so held for the
account of the lender, and after notice to the Company from the lender in
accordance with the normal procedures of the lender and any loan agreement
between the Company and the lender that an event of deficiency or default on the
loan has occurred, the Bank may deliver such pledged Portfolio Securities to or
for the account of the lender;
(h) for the purpose of releasing certificates representing Portfolio
Securities, against contemporaneous receipt by the Bank of the fair market value
of such securities, 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 Company to a
bank or broker dealer, but only against receipt in accordance with street
delivery custom except as otherwise provided herein, of adequate collateral as
agreed upon from time to time by the Company and the Bank, and upon receipt of
payment in connection with any repurchase agreement relating to such securities
entered into by the Company;
(j) for other authorized transactions of the Company 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 Company (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 Company or such purpose to be a proper
corporate purpose, and naming the person or persons to whom delivery of such
securities shall be made; and
(k) upon termination of this Agreement as hereinafter set forth
pursuant to Section 8 and Section 16 of this Agreement.
As to any deliveries made by the Bank pursuant to this Section 6.12,
securities or cash receivable in exchange therefor shall be delivered to the
Bank.
7. Redemptions. In the case of payment of assets of the Company held by
the Bank in connection with redemptions and repurchases by the Company of
outstanding common shares, the Bank will rely on notification by the Company'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 Declaration of Trust and By-laws of the Company
(the "Articles"), from assets available for said purpose.
8. Merger, Dissolution, etc. of Company. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of the
Company into or the consolidation of the Company with another investment
company, the sale by the Company of all, or substantially
13
all, of its assets to another investment company, or the liquidation or
dissolution of the Company and distribution of its assets, the Bank will deliver
the Portfolio Securities held by it under this Agreement and disburse cash only
upon the order of the Company set forth in an Officers' Certificate, accompanied
by a certified copy of a resolution of the Board authorizing any of the
foregoing transactions. Upon completion of such delivery and disbursement and
the payment of the fees through the end of the then current term of this
Agreement, and disbursements and expenses of the Bank, this Agreement will
terminate and the Bank shall be released from any and all obligations hereunder.
9. Actions of Bank Without Prior Authorization. Notwithstanding
anything herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, the Bank will take the following actions without
prior authorization or instruction of the Company or the transfer agent:
9.1 Endorse for collection and collect on behalf of and in the name
of the Company 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 Company and hold for the account of the Company all income,
dividends, interest and other payments or distributions of cash with respect to
the Portfolio Securities held thereunder;
9.2 Present for payment all coupons and other income items held by
it for the account of the Company which call for payment upon presentation and
hold the cash received by it upon such payment for the account of the Company;
9.3 Receive and hold for the account of the Company all securities
received as a distribution on Portfolio Securities as a result of a stock
dividend, share split-up, reorganization, recapitalization, merger,
consolidation, readjustment, distribution of rights and similar securities
issued with respect to any Portfolio Securities held by it hereunder.
9.4 Execute as agent on behalf of the Company 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 Company's name on
such certificates as the owner of the securities covered thereby, to the extent
it may lawfully do so and as may be required to obtain payment in respect
thereof. The Bank will execute and deliver such certificates in connection with
Portfolio Securities delivered to it or by it under this Agreement as may be
required under the provisions of the Internal Revenue Code and any Regulations
of the Treasury Department issued thereunder, or under the laws of any State;
9.5 Present for payment all Portfolio Securities which are called,
redeemed, retired or otherwise become payable, and hold cash received by it upon
payment for the account of the Company; and
9.6 Exchange interim receipts or temporary securities for definitive
securities.
10. Collections and Defaults. The Bank will use 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 Company notice actually received by it of any call for
redemption, offer of exchange, right of subscription, reorganization or other
proceedings affecting such Securities. If Portfolio Securities upon which such
income is payable are in default or payment is refused after due demand or
presentation, the Bank will notify the
14
Company in writing of any default or refusal to pay within two business days
from the day on which it receives knowledge of such default or refusal.
11. Maintenance of Records and Accounting Services. The Bank will
maintain records with respect to transactions for which the Bank is responsible
pursuant to the terms and conditions of this Agreement, and in compliance with
the applicable rules and regulations of the 1940 Act. The books and records of
the Bank pertaining to its actions under this Agreement and reports by the Bank
or its independent accountants concerning its accounting system, procedures for
safeguarding securities and internal accounting controls will be open to
inspection and audit at reasonable times by officers of or auditors employed by
the Company and will be preserved by the Bank in the manner and in accordance
with the applicable rules and regulations under the 1940 Act.
The Bank shall perform fund accounting and shall keep the books of account
and render statements or copies from time to time as reasonably requested by the
Treasurer or any executive officer of the Company.
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. Valuation and Yield Calculation
12.1 Fund Valuation. The Bank shall compute and, unless otherwise
directed by the Board, determine as of the close of regular trading on the New
York Stock Exchange on each day on which said Exchange is open for unrestricted
trading and as of such other days, or hours, if any, as may be authorized by the
Board, the net asset value and the public offering price of a share of capital
stock of each Fund, such determination to be made in accordance with the
provisions of the Articles of the Company and the Prospectus and Statement of
Additional Information relating to the Fund, as they may from time to time be
amended, and any applicable resolutions of the Board at the time in force and
applicable; and promptly to notify the Company, the proper exchange and the NASD
or such other persons as the Company 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 each Fund (the "Yield Calculation") in accordance with the provisions of
Release No. 33-6753 and Release No. IC-16245 (February 2, 1988) (the "Releases")
promulgated by the Securities and Exchange Commission, and any subsequent
amendments to, published interpretations of or general conventions accepted by
the staff of the Securities and Exchange Commission with respect to such
releases or the subject matter thereof ("Subsequent Staff Positions"), subject
to the terms set forth below:
15
(a) The Bank shall compute the Yield Calculation for each Fund for
the stated periods of time as shall be mutually agreed upon, and communicate in
a timely manner the result of such computation to the Fund.
(b) In performing the Yield Calculation, the Bank will derive the
items of data necessary for the computation from the records it generates and
maintains for the Company pursuant Section 11 hereof. The Bank shall have no
responsibility to review, confirm, or otherwise assume any duty or liability
with respect to the accuracy or correctness of any such data supplied to it by
the Company, any of the Company's designated agents or any of the Company's
designated third party providers.
(c) At the request of the Bank, the Company 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 Company. In the event that the computation methods in the Releases
or the Subsequent Staff Positions or the application to the Company 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
any 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 that 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 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. Additional Services. The Bank shall perform the additional services
for the Fund as are set forth on Appendix C hereto. Appendix C may be amended
from time to time upon agreement of the parties to include further additional
services to be provided by the Bank to the Fund, at which time the fees set
forth in Appendix B shall be appropriately increased.
14. Duties of the Bank.
14.1 Performance of Duties and Standard of Care. In performing its
duties hereunder and any other duties listed on any Schedule hereto, if any, the
Bank will be entitled to receive and act upon the advice of independent counsel
of its own selection, which may be counsel for the Fund, and will be without
liability for any action reasonably taken or thing done or omitted to be done in
accordance with this Agreement in good faith in conformity with such advice.
The Bank will be under no duty or obligation to inquire into and will not
be liable for:
(a) the validity of the issue of any Portfolio Securities purchased
by or for a Fund, the legality of the purchases thereof or the propriety of the
price incurred therefor;
16
(b) the legality of any sale of any Portfolio Securities by or for a
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 a Fund
or the sufficiency of the amount to be received therefor;
(d) the legality of the repurchase of any common shares of a Fund or
the propriety of the amount to be paid therefor;
(e) the legality of the declaration of any dividend by a 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 a Fund unless and until received by
it, and any such property or moneys delivered or paid by it pursuant to the
terms hereof.
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 a Fund are such as may properly be held by the Fund under
the provisions of its Articles, any federal or state statutes or any rule or
regulation of any governmental agency.
14.2 Agents and Subcustodians with Respect to Property of the Company
Held in the United States. The Bank may employ agents of its own selection in
the performance of its duties hereunder and shall be responsible for the acts
and omissions of such agents as if performed by the Bank hereunder. Without
limiting the foregoing, certain duties of the Bank hereunder may be performed by
one or more affiliates of the Bank.
Upon receipt of Proper Instructions, the Bank may employ subcustodians
selected by or at the direction of the Company, 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 Company's assets with
respect to property of the Company held in the United States. The Bank shall
have no liability to the Company or any other person by reason of any act or
omission of any such subcustodian and the Company shall indemnify the Bank and
hold it harmless from and against any and all actions, suits and claims, arising
directly or indirectly out of the performance of any subcustodian. Upon request
of the Bank, the Company shall assume the entire defense of any action, suit, or
claim subject to the foregoing indemnity. The Company shall pay all fees and
expenses of any subcustodian.
14.3 Duties of the Bank with Respect to Property of the Company Held
Outside of the United States.
(a) Appointment of Foreign Custody Manager.
(i) If the Company has appointed the Bank Foreign Custody
Manager (as that term is defined in Rule 17f-5 under the 1940 Act), the Bank's
duties and obligations with respect to the Company's Portfolio Securities and
other assets maintained outside the United States shall be, to the extent not
set forth herein, as set forth in the Delegation Agreement between the Company
and the Bank (the "Delegation Agreement").
(ii) If the Company has appointed any other person or entity
Foreign Custody Manager, the Bank shall act only upon Proper Instructions from
the Company with
17
regard to any of the Company's Portfolio Securities or other assets held or to
be held outside of the United States, and the Bank shall be without liability
for any Claim (as that term is defined in Section 15 hereof) arising out of
maintenance of the Company's Portfolio Securities or other assets outside of the
United States. The Company also agrees that it shall enter into a written
agreement with such Foreign Custody Manager that shall obligate such Foreign
Custody Manager to provide to the Bank in a timely manner all information
required by the Bank in order to complete its obligations hereunder. The Bank
shall not be liable for any Claim arising out of the failure of such Foreign
Custody Manager to provide such information to the Bank.
(b) Segregation of Securities. The Bank shall identify on its
books as belonging to the Company the Foreign Portfolio Securities held by each
foreign sub-custodian (each an "Eligible Foreign Custodian") selected by the
Foreign Custody Manager, subject to receipt by the Bank of the necessary
information from such Eligible Foreign Custodian if the Foreign Custody Manager
is not the Bank.
(c) Access of Independent Accountants of the Company. If the
Bank is the Company's Foreign Custody Manager, upon request of the Company, the
Bank will use its best efforts to arrange for the independent accountants of the
Company to be afforded access to the books and records of any foreign banking
institution employed as an Eligible Foreign Custodian insofar as such books and
records relate to the performance of such foreign banking institution with
regard to the Company's Portfolio Securities and other assets.
(d) Reports by Bank. If the Bank is the Company's Foreign
Custody Manager, the Bank will supply to the Company the reports required under
the Delegation Agreement.
(e) Transactions in Foreign Custody Account. Transactions with
respect to the assets of the Company held by an Eligible Foreign Custodian shall
be effected pursuant to Proper Instructions from the Company to the Bank and
shall be effected in accordance with the applicable agreement between the
Foreign Custody Manager and such Eligible Foreign Custodian. If at any time any
Foreign Portfolio Securities shall be registered in the name of the nominee of
the Eligible Foreign Custodian, the Company 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 received for
the account of the Company and delivery of Foreign Portfolio Securities
maintained for the account of the Company may be effected in accordance with the
customary established securities trading or securities processing practices and
procedures in the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to the purchaser thereof or
to a dealer therefor (or an agent for such purchaser or dealer) against a
receipt with the expectation of receiving later payment for such securities from
such purchaser or dealer.
In connection with any action to be taken with respect to the
Foreign Portfolio Securities held hereunder, including, without limitation, the
exercise of any voting rights, subscription rights, redemption rights, exchange
rights, conversion rights or tender rights, or any other action in connection
with any other right, interest or privilege with respect to such Securities
(collectively, the "Rights"), the Bank shall promptly transmit to the Company
such information in connection therewith as is made available to the Bank by the
Eligible Foreign Custodian, and shall promptly forward to the applicable
Eligible Foreign Custodian any
18
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 Company 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 Company 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 Company or by the applicable Eligible
Foreign 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.
(f) Tax Law. The Bank shall have no responsibility or liability for
any obligations now or hereafter imposed on the Company or the Bank as custodian
of the Company by the tax laws of any jurisdiction, and it shall be the
responsibility of the Company to notify the Bank of the obligations imposed on
the Company or the Bank as the custodian of the Company 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 responsibility of the Eligible Foreign Custodian with regard
to such tax law shall be to use reasonable efforts to assist the Company with
respect to any claim for exemption or refund under the tax law of jurisdictions
for which the Company has provided such information.
14.4 Insurance. The Bank shall use the same care with respect to the
safekeeping of Portfolio Securities and cash of the Company 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 Company.
14.5. Fees and Expenses of the Bank. The Company 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 Company will pay to
the Bank such compensation or fees at such rate and at such times as shall be
agreed upon in writing by the parties from time to time. The Bank will also be
entitled to reimbursement by the Company for all reasonable expenses incurred in
conjunction with termination of this Agreement.
14.6 Advances by the Bank. The Bank may, in its sole discretion,
advance funds on behalf of a Fund to make any payment permitted by this
Agreement upon receipt of any proper authorization required by this Agreement
for such payments by the Company. 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. Such overdraft shall bear interest at the current rate charged by the
Bank for such loans unless the Fund shall provide the Bank with agreed upon
compensating balances. The Company agrees that the Bank shall have a continuing
lien and security interest to the extent of any overdraft or indebtedness and to
the extent required by law, 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 Company authorizes the Bank, in the Bank's
sole discretion, at any time to charge any overdraft or indebtedness, together
with interest due thereon, against any balance of account standing to the credit
of the Company on the Bank's books.
15. Limitation of Liability.
19
15.1 Notwithstanding anything in this Agreement to the contrary, in
no event shall the Bank or any of its officers, directors, employees or agents
(collectively, the "Bank Indemnified Parties") be liable to the Company, and the
Company shall indemnify and hold the Bank and the Bank Indemnified Parties
harmless from and against any and all loss, damage, liability, actions, suits,
claims, costs and expenses, including legal fees, (a "Claim") arising as a
result of any act or omission of the Bank or any Bank Indemnified Party under
this Agreement, except for any Claim resulting from the negligence, willful
misfeasance or bad faith of the Bank or any Bank Indemnified Party. Without
limiting the foregoing, neither the Bank nor the Bank Indemnified Parties shall
be liable for, and the Bank and the Bank Indemnified Parties shall be
indemnified against, any Claim arising as a result of:
(a) Any act or omission by the Bank or any Bank Indemnified
Party in good faith reliance upon any Officer's Certificate, Proper
Instructions, resolution of the Board, telegram, telecopier, notice, request,
certificate or other instrument reasonably believed by the Bank to genuine;
(b) Any act or omission of any subcustodian selected by the
Company;
(c) Any act or omission of any Foreign Custody Manager other
than the Bank or any act or omission of any Eligible Foreign Custodian if the
Bank is not the Foreign Custody Manager;
(d) Any Corporate Action, distribution or other event related
to Portfolio Securities which, at the direction of the Company, have not been
registered in the name of the Bank or its nominee;
(e) Any Corporate Action requiring a Response for which the
Bank has not received Proper Instructions or obtained actual possession of all
necessary Securities, consents or other materials by 5:00 p.m. on the date
specified as the Response Deadline;
(f) Any act or omission of any European Branch of a U.S.
banking institution that is the issuer of Eurodollar CDs in connection with any
Eurodollar CDs held by such European Branch; or
(g) Information relied on in good faith by the Bank and
supplied by any Authorized Person in connection with the calculation of (i) the
net asset value and public offering price of the shares of capital stock of the
Company or (ii) the Yield Calculation.
15.2 Notwithstanding anything in this Agreement to the contrary, in
no event shall the Company or any of its officers, directors, employees or
agents (collectively, the "Company Indemnified Parties") be liable to the Bank,
and the Bank shall indemnify and hold the Company and the Company Indemnified
Parties harmless from and against any and all claims arising as a result of any
act or omission of the Bank or any Bank Indemnified Party under this Agreement
that constitutes negligence, willful misfeasance or bad faith of the Bank or
such Bank Indemnified Party.
15.3 Neither party shall be liable to the other for any loss,
damage, liability, action, suit, claim, cost or expense arising from any acts of
God, earthquakes, fires, floods, storms or other
20
disturbances of nature, epidemics, strikes, riots, nationalization,
expropriation, currency restrictions, acts of war, civil war or terrorism,
insurrection, nuclear fusion, fission or radiation other similar happenings or
events that can not be controlled or contained by such party. Neither party
shall be liable to the other for any loss, damage, liability, action, suit,
claim, cost or expense arising from the interruption, loss or malfunction of
utilities or transportation or the unavailability of energy sources except to
the extent such interruption, loss or malfunction is reasonably forseeable and
subject to correction in a commercially reasonable business continuity program.
15.4 The Bank certifies that the occurrence in or use by the Bank's
own proprietary internal systems (the "Systems") of dates before or after
January 1, 2000 (the "Millennial Dates") will not adversely affect the
performance of the Systems with respect to date dependent data, computations,
output or other functions (including, without limitation, calculating, computing
and sequencing) and that the Systems will create, store and generate output data
related to or including Millennial Dates without errors or omissions ("Year 2000
Compliance").
The parties acknowledge that the Bank relies on automated data communications
with vendors, clients and other third parties, as well as certain third party
hardware and software providers such as Electronic Data Systems. The Bank also
relies on other third party relationships in the conduct of its business. For
example, the Bank relies on the services of the landlords of its facilities,
telecommunication companies, utilities and commercial airlines, among others.
The parties acknowledge that the Bank can make no certification as to the Year
2000 Compliance of third-parties utilized by the Bank in its day to day
operations or with which the Systems interact or communicate, from which the
Systems receive data or to which the Systems send data. The parties further
acknowledge that while the Bank has contacted such third-parties regarding Year
2000 Compliance and will use reasonable efforts to monitor the status of such
third-parties' Year 2000 Compliance, failure by such third-parties to achieve
timely Year 2000 Compliance could adversely affect the Bank's performance.
15.5 Notwithstanding anything to the contrary in this Agreement, in
no event shall the Bank be liable for special, incidental or consequential
damages, even if advised of the possibility of such damages.
16. Termination.
16.1 The term of this Agreement shall be three years commencing upon
the date hereof (the "Initial Term"), unless earlier terminated as provided
herein. After the expiration of the Initial Term, the term of this Agreement
shall automatically renew for successive three-year terms (each a "Renewal
Term") unless notice of non-renewal is delivered by the non-renewing party to
the other party no later than ninety days prior to the expiration of the Initial
Term or any Renewal Term, as the case may be.
Either party hereto may terminate this Agreement prior to the
expiration of the Initial Term or any Renewal Term:
(a) in the event the other party violates any material provision
of this Agreement, provided that the non-violating party gives
written notice of such violation to the violating party and
the violating party does not cure such violation within 90
days of receipt of such notice
(b) If a majority of the Board reasonably determines that the
performance of the
21
Bank under this Agreement has been unsatisfactory, written
notice (the "Notice") of such determination setting forth the
reasons for such determination shall be provided to the Bank.
In the event the Bank shall not, within thirty (30) days
thereafter, cure identified deficiencies to the satisfaction
of the Board, the Company, with the authorization of the
Board, may terminate this Agreement.
16.2 In the event of the termination of this Agreement, the Bank
will upon receipt or transmittal, as the case may be, of notice of termination,
continue nonetheless to discharge all of its obligations hereunder until
designation by the Company of a successor custodian and, upon appointment of a
successor custodian shall 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 such successor. If the Company
does not select a successor custodian within ninety (90) days from the date of
delivery of notice of termination the Bank may, subject to the provisions of
subsection 16.3, deliver the Portfolio Securities and cash of the Company held
by the Bank to a bank or trust company of the Bank's own selection which meets
the requirements of Section 17(f)(1) of the 1940 Act and has a reported capital,
surplus and undivided profits aggregating not less than $2,000,000, to be held
as the property of the Company 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 Company with the same
effect as though selected by the Board. Thereafter, the Bank shall be released
from any and all obligations under this Agreement.
16.3 Prior to the expiration of one hundred and twenty (120) days
after notice of termination has been given, the Company may furnish the Bank
with an order of the Company 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 Company the question of whether the
Company will be liquidated or will function without a custodian for the assets
of the Company held by the Bank. In that event the Bank will deliver the
Portfolio Securities and cash of the Company 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 Company's Secretary and an opinion of counsel to the Company in form and
content satisfactory to the Bank. Thereafter, the Bank shall be released from
any and all obligations under this Agreement.
16.4 The Company shall reimburse the Bank for any reasonable
expenses incurred by the Bank in connection with the termination of this
Agreement.
16.5 At any time after the termination of this Agreement, the
Company may, upon written request, have reasonable access to the records of the
Bank relating to its performance of its duties as custodian.
17. Confidentiality. Both parties hereto agree than any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed without the 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, in addition
to all other remedies at law or in equity to an injunction or injunctions
without bond or other security to prevent breaches of this provision.
22
18. Notices. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and delivered via (i) United
States Postal Service registered mail, (ii) telecopier with written
confirmation, or (iii) hand delivery with signature to such party at its office
at the address set forth below, namely:
(a) In the case of notices sent to the Company to:
Commonfund Institutional Funds
Attn: Treasurer
c/o Commonfund
000 Xxxx Xxxx Xxxx
Xxxxxxxx, XX 00000-0000
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
000 Xxxxxxxxx Xxxxxx, X.X. Xxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxx Xxxx, Senior Director - Client Management
With a copy to: Xxxx X. Xxxxx, General Counsel
or at such other place as such party may from time to time designate
in writing.
19. Amendments. This Agreement may not be altered or amended, except by
an instrument in writing, executed by both parties.
20. Parties. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Company
without the written consent of the Bank or by the Bank without the written
consent of the Company, authorized and approved by its Board; and provided
further that termination proceedings pursuant to Section 16 hereof will not be
deemed to be an assignment within the meaning of this provision.
21. Governing Law. This Agreement and all performance hereunder will be
governed by the laws of the Commonwealth of Massachusetts, without regard to
conflict of laws provisions.
22. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
23. Entire Agreement. This Agreement, together with its Appendices,
constitutes the sole and entire agreement between the parties relating to the
subject matter herein and does not operate as an acceptance of any conflicting
terms or provisions of any other instrument and terminates and supersedes any
and all prior agreements and undertakings between the parties relating to the
subject matter herein.
24. Limitation of Liability. The Bank agrees that the obligations
assumed by the Company hereunder shall be limited in all cases to the assets of
the Company and that the Bank shall not seek satisfaction of any such obligation
from the officers, agents, employees, trustees, or shareholders of the Company.
23
25. Several Obligations of the Funds. This Agreement is an agreement
entered into between the Bank and the Company with respect to each Fund. With
respect to any obligation of the Company on behalf of any Fund arising out of
this Agreement, the Bank shall look for payment or satisfaction of such
obligation solely to the assets of the Fund to which such obligation relates as
though the Bank had separately contracted with the Company by separate written
instrument with respect to each Fund.
[Remainder of Page Intentionally Left Blank]
24
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.
COMMONFUND INSTITUTIONAL FUNDS
By: /s/ Xxxxxx X. Xxxx
-------------------------------
Name: Xxxxxx X. Xxxx
Title: Vice President and Treasurer
INVESTORS BANK & TRUST COMPANY
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President
25
Appendices
Appendix A................................. Funds
Appendix B................................. Fee Schedule
Appendix C................................. Additional Services
26
Appendix A
Funds
Commonfund Short Duration Fund
00
Xxxxxxxx X
Fees
The Company shall pay the Custodian a fee for services rendered to the
Short Duration Fund accrued daily and paid monthly at the following annual rates
using a 365 day year:
NET ASSETS OF THE FUND ANNUAL RATE
$10 billion or less 0.0235%
Over $10 billion 0.0185%
In addition, for each investment Sub-Advisor retained by the Fund in
excess of four, the Company shall pay the Custodian an annual fee, accrued daily
and paid monthly, of $25,000.
Legal expenses, printing, delivery, postage, travel and Xxxxx filings, and
apportioned costs of third party review (SAS 70) will be for the account of the
Company.
Incremental basis point and transaction fees will be payable for all
foreign assets based upon the attached global custody fee schedule. Local
duties, scrip fees, proxy handling, postage, delivery and legal fees are for the
account of the Company. Fees for services in markets not included on the
attached global custody fee schedule will be negotiated on a case by case basis.
Fees will be invoiced by Custodian and, after approval of the
Treasurer, charged against the Custodial Account. Payment is due within five (5)
days.
28
Appendix C
Additional Services
None
