CUSTODY AGREEMENT
THIS AGREEMENT is made effective the 24th day of May, 1999, by and
between INVESTORS FIDUCIARY TRUST COMPANY, a trust company chartered under the
laws of the state of Missouri, having its trust office located at 000
Xxxxxxxxxxxx Xxxxxx, Xxxxxx Xxxx, Xxxxxxxx 00000 ("IFTC"), and PILGRIM MUTUAL
FUNDS, a Delaware trust, having its principal office and place of business at
Two Renaissance Square, 00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx
00000 ("Fund").
WITNESSETH:
WHEREAS, Fund desires to appoint IFTC as custodian of the assets of the
Fund's investment portfolio or portfolios (each a "Portfolio", and collectively
the "Portfolios"); and
WHEREAS, IFTC is willing to accept such appointment on the terms and
conditions hereinafter set forth;
NOW THEREFORE, for and in consideration of the mutual promises
contained herein, the parties hereto, intending to be legally bound, mutually
covenant and agree as follows:
1. APPOINTMENT OF CUSTODIAN AND AGENT. Fund hereby constitutes and appoints
IFTC as custodian of the investment securities, interests in loans and
other non-cash investment property, and monies at any time owned by each of
the Portfolios and delivered to IFTC as custodian hereunder ("Assets").
2. REPRESENTATIONS AND WARRANTIES.
A. Fund hereby represents, warrants and acknowledges to IFTC:
1. That it is a trust duly organized and existing and in good
standing under the laws of its state of organization, and that it
is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
2. That it has the requisite power and authority under applicable
law and its declaration of trust) to enter into this Agreement;
it has taken all requisite action necessary to appoint IFTC as
custodian for the Portfolios; this Agreement has been duly
executed and delivered by Fund; and this Agreement constitutes a
legal, valid and binding obligation of Fund, enforceable in
accordance with its terms.
B. IFTC hereby represents, warrants and acknowledges to Fund:
1. That it is a trust company duly organized and existing and in
good standing under the laws of the State of Missouri; and
2. That it has the requisite power and authority under applicable
law, its charter and its bylaws to enter into and perform this
Agreement; this Agreement has been duly executed and delivered by
IFTC; and this Agreement constitutes a legal, valid and binding
obligation of IFTC, enforceable in accordance with its terms.
3. DUTIES AND RESPONSIBILITIES OF THE PARTIES.
A. Delivery of Assets. Except as permitted by the 1940 Act, Fund will
deliver or cause to be delivered to IFTC on the effective date hereof,
or as soon thereafter as practicable, and from time to time
thereafter, all Assets acquired by, owned by or from time to time
coming into the possession of each of the Portfolios during the term
hereof. IFTC has no responsibility or liability whatsoever for or on
account of assets not so delivered.
B. Delivery of Accounts and Records. Fund will turn over or cause to be
turned over to IFTC all of each Portfolio's relevant accounts and
records needed by IFTC to perform its duties and responsibilities
hereunder fully and properly . IFTC may rely conclusively on the
completeness and correctness of such accounts and records.
C. Delivery of Assets to Third Parties. IFTC will receive delivery of and
keep safely the Assets ------------------------------------ of each
Portfolio segregated in a separate account. Upon delivery of any such
Assets to a subcustodian appointed pursuant hereto (hereinafter
referred to as "Subcustodian"), IFTC will create and maintain records
identifying such Assets as belonging to the applicable Portfolio. IFTC
is responsible for the safekeeping of the Assets only until they have
been transmitted to and received by other persons as permitted under
the terms hereof, except for Assets transmitted to Subcustodians, for
which IFTC remains responsible to the extent provided herein. IFTC may
participate directly or indirectly through a subcustodian in the
Depository Trust Company (DTC), Treasury/Federal Reserve Book Entry
System (Fed System), Participant Trust Company (PTC) or other
depository approved by Fund (as such entities are defined at 17 CFR
Section 270.17f-4(b)) (each a "Depository" and collectively the
"Depositories"). IFTC will be responsible to Fund for any loss, damage
or expense suffered or incurred by Fund resulting from the actions or
omissions of any Depository only to the same extent such Depository is
responsible to IFTC.
D. Registration. IFTC will at all times hold registered Assets in the
name of IFTC as custodian, the applicable Portfolio, or a nominee of
either of them, unless specifically directed by Instructions, as
hereinafter defined, to hold such registered Assets in so-called
"street name;" provided that, in any event, IFTC will hold all such
Assets in an account of IFTC as custodian containing only Assets of
the applicable Portfolio, or only assets held by IFTC as a fiduciary
or custodian for customers; and provided further, that IFTC's records
at all times will indicate the Portfolio or other customer for which
such Assets are held and the respective interests therein. If,
however, Fund directs IFTC to maintain Assets in "street name",
notwithstanding anything contained herein to the contrary, IFTC will
be obligated only to utilize its best efforts to timely collect income
due the Portfolio on such Assets and to notify the Portfolio of
relevant information, such as maturities and pendency of calls, and
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corporate actions including, without limitation, calls for redemption,
tender or exchange offers, declaration, record and payment dates and
amounts of any dividends or income, reorganization, recapitalization,
merger, consolidation, split-up of shares, change of par value, or
conversion ("Corporate Actions"). All Assets and the ownership thereof
by Portfolio will at all times be identifiable on the records of IFTC.
Fund agrees to hold IFTC and its nominee harmless for any liability as
a shareholder of record of securities held in custody.
E. Exchange. Upon receipt of Instructions, IFTC will exchange, or cause
to be exchanged, Assets held for the account of a Portfolio for other
Assets issued or paid in connection with any Corporate Action or
otherwise, and will deposit any such Assets in accordance with the
terms of any such Corporate Action. Without Instructions, IFTC is
authorized to exchange Assets in temporary form for Assets in
definitive form, to effect an exchange of shares when the par value of
stock is changed, and, upon receiving payment therefor, to surrender
bonds or other Assets at maturity or when advised of earlier call for
redemption, except that IFTC will receive Instruction prior to
surrendering any convertible security.
F. Purchases of Investments -- Other Than Options and Futures. On each
business day on which a Portfolio makes a purchase of Assets other
than options and futures, Fund will deliver to IFTC Instructions
specifying with respect to each such purchase:
1. If applicable, the name of the Portfolio making such purchase;
2. The name of the issuer and description of the Asset;
3. The number of shares and the principal amount purchased, and
accrued interest, if any;
4. The trade date;
5. The settlement date;
6. The purchase price per unit and the brokerage commission, taxes
and other expenses payable in connection with the purchase;
7. The total amount payable upon such purchase;
8. The name of the person from whom or the broker or dealer through
whom the purchase was made; and
9. Whether the Asset is to be received in certificated form or via a
specified Depository.
In accordance with such Instructions, IFTC will pay for out of monies
held for the purchasing Portfolio, but only insofar as such monies are
available for such purpose, and receive the Assets so purchased by or
for the account of such Portfolio, except that IFTC, or a
Subcustodian, may in its sole discretion advance funds to such
Portfolio which may result in an overdraft because the monies held on
behalf of such Portfolio are insufficient to pay the total amount
payable upon such purchase. Except as otherwise instructed by Fund,
IFTC will make such payment only upon receipt of Assets: (a) by IFTC;
(b) by a clearing corporation of a national exchange of which IFTC is
a member; or (c) by a Depository. Notwithstanding the foregoing, (i)
IFTC may release funds to a Depository prior to the receipt of advice
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from the Depository that the Assets underlying a repurchase agreement
have been transferred by book-entry into the account maintained with
such Depository by IFTC on behalf of its customers; provided that
IFTC's instructions to the Depository require that the Depository make
payment of such funds only upon transfer by book-entry of the Assets
underlying the repurchase agreement in such account; (ii) IFTC may
make payment for time deposits, call account deposits, currency
deposits and other deposits, foreign exchange transactions, futures
contracts or options, before receipt of an advice or confirmation
evidencing said deposit or entry into such transaction; and (iii) IFTC
may make, or cause a Subcustodian to make, payment for the purchase of
Assets the settlement of which occurs outside of the United States of
America in accordance with generally accepted local custom and market
practice.
G. Sales and Deliveries of Investments -- Other Than Options and Futures.
On each business day on which a Portfolio makes a sale of Assets other
than options and futures, Fund will deliver to IFTC Instructions
specifying with respect to each such sale:
1. If applicable, the name of the Portfolio making such sale;
2. The name of the issuer and description of the Asset;
3. The number of shares and principal amount sold, and accrued
interest, if any;
4. The date on which the Assets sold were purchased or other
information identifying the Assets sold and to be delivered;
5. The trade date;
6. The settlement date;
7. The sale price per unit and the brokerage commission, taxes or
other expenses payable in connection with such sale;
8. The total amount to be received by the Portfolio upon such sale;
and
9. The name and address of the broker or dealer through whom or
person to whom the sale was made.
IFTC will deliver or cause to be delivered the Assets thus designated
as sold for the account of the selling Portfolio as specified in the
Instructions. Except as otherwise instructed by Fund, IFTC will make
such delivery upon receipt of: (a) payment therefor in such form as is
satisfactory to IFTC; (b) credit to the account of IFTC with a
clearing corporation of a national securities exchange of which IFTC
is a member; or (c) credit to the account maintained by IFTC on behalf
of its customers with a Depository. Notwithstanding the foregoing: (i)
IFTC will deliver Assets held in physical form in accordance with
"street delivery custom" to a broker or its clearing agent; or (ii)
IFTC may make, or cause a Subcustodian to make, delivery of Assets the
settlement of which occurs outside of the United States of America
upon payment therefor in accordance with generally accepted local
custom and market practice.
H. Purchases or Sales of Options and Futures. On each business day on
which a Portfolio makes a purchase or sale of the options and/or
futures listed below, Fund will deliver to IFTC Instructions
specifying with respect to each such purchase or sale:
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1. If applicable, the name of the Portfolio making such purchase or
sale;
2. In the case of security options:
a. The underlying security;
b. The price at which purchased or sold;
c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening, exercising, expiring
or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased;
i. Market on which option traded; and
j. Name and address of the broker or dealer through whom the
sale or purchase was made.
3. In the case of options on indices:
a. The index;
b. The price at which purchased or sold;
c. The exercise price;
d. The premium;
e. The multiple;
f. The expiration date;
g. Whether the transaction is an opening, exercising, expiring
or closing transaction;
h. Whether the transaction involves a put or call;
i. Whether the option is written or purchased; and
j. The name and address of the broker or dealer through whom
the sale or purchase was made, or other applicable
settlement instructions.
4. In the case of security index futures contracts:
a. The last trading date specified in the contract and, when
available, the closing level, thereof;
b. The index level on the date the contract is entered into;
c. The multiple;
d. Any margin requirements;
e. The need for a segregated margin account (in addition to
Instructions, and if not already in the possession of IFTC,
Fund will deliver a substantially complete and executed
custodial safekeeping account and procedural agreement,
incorporated herein by reference); and
f. The name and address of the futures commission merchant
through whom the sale or purchase was made, or other
applicable settlement instructions.
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5. In the case of options on index future contracts:
a. The underlying index future contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves an opening, exercising,
expiring or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased; and
i. The market on which the option is traded.
I. Assets Pledged or Loaned. If specifically allowed for in the
prospectus of a Portfolio, and subject to such additional terms
and conditions as IFTC may require:
1. Upon receipt of Instructions, IFTC will release or cause to
be released Assets to the designated pledgee by way of
pledge or hypothecation to secure any loan incurred by a
Portfolio; provided, however, that IFTC will release Assets
only upon payment to IFTC of the monies borrowed, except
that in cases where additional collateral is required to
secure a borrowing already made, further Assets may be
released or caused to be released for that purpose. Upon
receipt of Instructions, IFTC will pay, but only from funds
available for such purpose, any such loan upon redelivery to
it of the Assets pledged or hypothecated therefor and upon
surrender of the note or notes evidencing such loan.
2. Upon receipt of Instructions, IFTC will release Assets to
the designated borrower; provided, however, that the Assets
will be released only upon deposit with IFTC of full cash
collateral as specified in such Instructions, and that the
lending Portfolio will retain the right to any dividends,
interest or distribution on such loaned Assets. Upon receipt
of Instructions and the loaned Assets, IFTC will release the
cash collateral to the borrower.
J. Routine Matters. IFTC will, in general, attend to all routine and
mechanical matters in connection with the sale, exchange,
substitution, purchase, transfer, or other dealings with the
Assets except as may be otherwise provided herein or upon
Instruction from Fund.
K. Deposit Accounts. IFTC will open and maintain one or more special
purpose deposit accounts for each Portfolio in the name of IFTC
in such banks or trust companies (including, without limitation,
affiliates of IFTC) as may be designated by it or Fund in writing
("Accounts"), subject only to draft or order by IFTC upon receipt
of Instructions. IFTC will deposit all monies received by IFTC
from or for the account of a Portfolio in an Account maintained
for such Portfolio. Subject to Section 5.L hereof, IFTC agrees:
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1. To make Fed Funds available to the applicable Portfolio at
9:00 a.m., Kansas City time, on the second business day
after deposit of any check into an Account, in the amount of
the check;
2. To make funds available immediately upon a deposit made by
Federal Reserve wire; and
3. To make funds available on the next business day after
deposit of ACH wires.
L. Income and Other Payments. IFTC will:
1. Collect, claim and receive and deposit for the account of
the applicable Portfolio all income (including income from
the Accounts) and other payments which become due and
payable on or after the effective date hereof with respect
to the Assets, and credit the account of such Portfolio in
accordance with the schedule attached hereto as Exhibit A.
If, for any reason, a Portfolio is credited with income that
is not subsequently collected, IFTC may reverse that
credited amount. If monies are collected after such
reversal, IFTC will credit the Portfolio in that amount;
2. Execute ownership and other certificates and affidavits for
all federal, state and local tax purposes in connection with
the collection of bond and note coupons; and
3. Take such other action as may be necessary or proper in
connection with (a) the collection, receipt and deposit of
such income and other payments, including but not limited to
the presentation for payment of all coupons and other income
items requiring presentation; and all other Assets which may
mature or be called, redeemed, retired or otherwise become
payable and regarding which IFTC has actual knowledge, or
should reasonably be expected to have knowledge; and (b) the
endorsement for collection, in the name of Fund or a
Portfolio, of all checks, drafts or other negotiable
instruments.
IFTC, however, will not be required to institute suit or take other
extraordinary action to enforce collection except upon receipt of
Instructions and upon being indemnified to its satisfaction against
the costs and expenses of such suit or other actions. IFTC will
receive, claim and collect all stock dividends, rights and other
similar items and will deal with the same pursuant to Instructions.
M. Proxies and Notices. IFTC will promptly deliver or mail (or have
delivered or mailed) to Fund all proxies properly signed, all notices
of meetings, all proxy statements and other notices, requests or
announcements affecting or relating to Assets and will, upon receipt
of Instructions, execute and deliver or mail (or cause its nominee to
execute and deliver or mail) such proxies or other authorizations as
may be required. Except as provided herein or pursuant to Instructions
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hereafter received by IFTC, neither it nor its nominee will exercise
any power inherent in any such Assets, including any power to vote the
same, or execute any proxy, power of attorney, or other similar
instrument voting any of such Assets, or give any consent, approval or
waiver with respect thereto, or take any other similar action.
N. Disbursements. IFTC will pay or cause to be paid, insofar as funds are
available for the purpose, bills, statements and other obligations of
each Portfolio (including but not limited to obligations in connection
with the conversion, exchange or surrender of Assets, interest
charges, dividend disbursements, taxes, management fees, custodian
fees, legal fees, auditors' fees, transfer agents' fees, brokerage
commissions, compensation to personnel, and other operating expenses
of such Portfolio) pursuant to Instructions setting forth the name of
the person to whom payment is to be made, and the amount and purpose
of the payment.
O. Daily Statement of Accounts. IFTC will, within a reasonable time,
render to Fund a detailed statement of the amounts received or paid
and of Assets received or delivered for the account of each Portfolio
during each business day. IFTC will maintain such books and records as
are necessary to enable it to render, from time to time upon request
by Fund, a detailed statement of the Assets. IFTC will permit, and
upon Instruction will cause any Subcustodian to permit, such persons
as are authorized by Fund, including Fund's independent public
accountants, reasonable access to such records or will provide
reasonable confirmation of the contents of such records, and if
demanded, IFTC will permit, and will cause any Subcustodian to permit,
federal and state regulatory agencies to examine the Assets, books and
records of the Portfolios.
P. Appointment of Subcustodians. Notwithstanding any other provisions
hereof:
1. All or any of the Assets may be held in IFTC's own custody or in
the custody of one or more other banks or trust companies
(including, without limitation, affiliates of IFTC) acting as
Subcustodians as may be selected by IFTC. Any such Subcustodian
selected by IFTC must have the qualifications required for a
custodian under the 1940 Act. IFTC will be responsible to the
applicable Portfolio for any loss, damage or expense suffered or
incurred by such Portfolio resulting from the actions or
omissions of any Subcustodians selected and appointed by IFTC
(except Subcustodians appointed at the request of Fund and as
provided in Subsection 2 below) to the same extent IFTC would be
responsible to Fund hereunder if it committed the act or omission
itself.
2. Upon request of Fund, IFTC will contract with other Subcustodians
reasonably acceptable to IFTC for purposes of (a) effecting
third-party repurchase transactions with banks, brokers, dealers,
or other entities through the use of a common custodian or
subcustodian, or (b) providing depository and clearing agency
services with respect to certain variable rate demand note
securities, or (c) for other reasonable purposes specified by
Fund; provided, however, that IFTC will be responsible to Fund
for any loss, damage or expense suffered or incurred by Fund
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resulting from the actions or omissions of any such Subcustodian
only to the same extent such Subcustodian is responsible to IFTC.
Fund may review IFTC's contracts with such Subcustodians.
Q. Foreign Custody Manager.
1. Delegation to IFTC as FCM.The Fund, pursuant to resolution
adopted by its Board of Trustees or Directors (the "Board"),
hereby delegates to IFTC, subject to Section (b) of Rule 17f-5,
the responsibilities set forth in this Section Q with respect to
Foreign Assets held outside the United States, and IFTC hereby
accepts such delegation, as Foreign Custody Manager ("FCM") of
each Portfolio. It is understood and agreed that IFTC will
sub-contract the performance of its responsibilities hereunder
with State Street Bank & Trust Company. IFTC will be responsible
to the applicable Portfolio for any loss, damage or expense
suffered or incurred by such Portfolio resulting from the actions
or omissions of State Street Bank & Trust Company to the same
extent IFTC would be responsible to Fund hereunder if it
committed the act or omission itself. References herein to "FCM"
shall include IFTC and State Street Bank & Trust Company.
2. Definitions. Capitalized terms in this Section Q have the
following meanings:
"Country Risk" means all factors reasonably related to the
systemic risk of holding Foreign Assets in a particular country
including, but not limited to, such country's political
environment; economic and financial infrastructure (including
financial institutions such as any Mandatory Securities
Depositories operating in the country); prevailing or developing
custody and settlement practices; and laws and regulations
applicable to the safekeeping and recovery of Foreign Assets held
in custody in that country.
"Eligible Foreign Custodian" has the meaning set forth in section
(a)(1) of Rule 17f-5, except that the term does not include
Mandatory Securities Depositories.
"Foreign Assets" means any of the Portfolios' investments
(including foreign currencies) for which the primary market is
outside the United States and such cash and cash equivalents in
amounts deemed by Fund to be reasonably necessary to effect the
Portfolios' transactions in such investments.
"Foreign Custody Manager" or "FCM" has the meaning set forth in
section (a)(2) of Rule 17f-5.
"Mandatory Securities Depository" means a foreign securities
depository or clearing agency that, either as a legal or
practical matter, must be used if the Fund determines to place
Foreign Assets in a country outside the United States (i) because
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required by law or regulation; (ii) because securities cannot be
withdrawn from such foreign securities depository or clearing
agency; or (iii) because maintaining or effecting trades in
securities outside the foreign securities depository or clearing
agency is not consistent with prevailing or developing custodial
or market practices.
3. Countries Covered. The FCM is responsible for performing the
delegated responsibilities defined below only with respect to the
countries and custody arrangements for each such country listed
on Exhibit C hereto , which may be amended from time to time by
the FCM. The FCM will list on Exhibit C the Eligible Foreign
Custodians selected by the FCM to maintain the assets of each
Portfolio. Mandatory Securities Depositories are listed on
Exhibit D hereto, which Exhibit D may be amended from time to
time by the FCM. The FCM will provide amended versions of
Exhibits C and D in accordance with subsection 7 of this Section
Q.
Upon the receipt by the FCM of Instructions to open an account,
or to place or maintain Foreign Assets, in a country listed on
Exhibit C, and the fulfillment by the Fund of the applicable
account opening requirements for such country, the FCM is deemed
to have been delegated by the Board responsibility as FCM with
respect to that country and to have accepted such delegation.
Following the receipt of Instructions directing the FCM to close
the account of a Portfolio with the Eligible Foreign Custodian
selected by the FCM in a designated country, the delegation by
the Board to IFTC as FCM for that country is deemed to have been
withdrawn and IFTC will immediately cease to be the FCM of the
Portfolio with respect to that country.
The FCM may withdraw its acceptance of delegated responsibilities
with respect to a designated country upon written notice to the
Fund. Thirty days (or such longer period as to which the parties
agree in writing) after receipt of any such notice by the Fund,
IFTC will have no further responsibility as FCM to a Portfolio
with respect to the country as to which IFTC's acceptance of
delegation is withdrawn.
4. Scope of Delegated Responsibilities.
a. Selection of Eligible Foreign Custodians. Subject to the
provisions of this Section Q, the FCM may place and maintain
the Foreign Assets in the care of the Eligible Foreign
Custodian selected by the FCM in each country listed on
Exhibit C, as amended from time to time.
In performing its delegated responsibilities as FCM to place
or maintain Foreign Assets with an Eligible Foreign
Custodian, the FCM will determine that the Foreign Assets
will be subject to reasonable care, based on the standards
applicable to custodians in the country in which the Foreign
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Assets will be held by that Eligible Foreign Custodian,
after considering all factors relevant to the safekeeping of
such assets, including, without limitation, those set forth
in Rule 17f-5(c)(1)(i) through (iv).
b. Contracts With Eligible Foreign Custodians. The FCM will
determine that the contract (or the rules or established
practices or procedures in the case of an Eligible Foreign
Custodian that is a foreign securities depository or
clearing agency) governing the foreign custody arrangements
with each Eligible Foreign Custodian selected by the FCM
will provide reasonable care for the Foreign Assets held by
that Eligible Foreign Custodian based on the standards
applicable to custodians in the particular country. Each
such contract will include the provisions set forth in Rule
17f-5(c)(2)(I)(A) through (F), or, in lieu of any or all of
the provisions set forth in said (A) through (F), such other
provisions that the FCM determines will provide, in their
entirety, the same or greater level of care and protection
for the Foreign Assets as the provisions set forth in said
(A) through (F) in their entirety.
c. Monitoring. In each case in which the FCM maintains Foreign
Assets with an Eligible Foreign Custodian selected by the
FCM, the FCM will establish a system to monitor (a) the
appropriateness of maintaining the Foreign Assets with such
Eligible Foreign Custodian and (b) the contract governing
the custody arrangements established by the FCM with the
Eligible Foreign Custodian. In the event the FCM determines
that the custody arrangements with an Eligible Foreign
Custodian it has selected are no longer appropriate, the FCM
will notify the Board in accordance with subsection 7 of
this Section Q.
5. Guidelines for the Exercise of Delegated Authority. For purposes
of this Section Q, the Board will be solely responsible for
considering and determining to accept such Country Risk as is
incurred by placing and maintaining the Foreign Assets in each
country for which IFTC is serving as FCM of a Portfolio, and the
Board will be solely responsible for monitoring on a continuing
basis such Country Risk to the extent that the Board considers
necessary or appropriate. The Fund, on behalf of the Portfolios,
and IFTC each expressly acknowledge that the FCM will not be
delegated any responsibilities under this Section Q with respect
to Mandatory Securities Depositories.
6. Standard of Care as FCM of a Portfolio. In performing the
responsibilities delegated to it, the FCM agrees to exercise
reasonable care, prudence and diligence such as a person having
responsibility for the safekeeping of assets of management
investment companies registered under the 1940 Act would
exercise.
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7. Reporting Requirements. The FCM will report the withdrawal of the
Foreign Assets from an Eligible Foreign Custodian and the
placement of such Foreign Assets with another Eligible Foreign
Custodian by providing to the Board amended Exhibits C and D at
the end of the calendar quarter in which an amendment to either
Schedule has occurred. The FCM will make written reports
notifying the Board of any other material change in the foreign
custody arrangements of a Portfolio described in this Section Q
after the occurrence of the material change.
8. Representations with Respect to Rule 17f-5. The FCM represents to
the Fund that it is a U.S. Bank as defined in section (a)(7) of
Rule 17f-5.
The Fund represents to IFTC that the Board has determined that it
is reasonable for the Board to rely on IFTC and State Street Bank
& Trust Company to perform the responsibilities delegated
pursuant to this Contract to IFTC and State Street Bank & Trust
Company as the FCM of each Portfolio and that IFTC has been
granted the authority by Fund to delegate to State Street Bank &
Trust Company the FCM functions to which IFTC has been appointed
by Fund.
9. Effective Date and Termination of IFTC as FCM. The Board's
delegation to IFTC as FCM of a Portfolio will be effective as of
the date hereof and will remain in effect until terminated at any
time, without penalty, by written notice from the terminating
party to the non-terminating party. Termination will become
effective thirty days after receipt by the non-terminating party
of such notice. The provisions of subsection 3 of this Section Q
govern the delegation to and termination of IFTC as FCM of the
Fund with respect to designated countries.
R. Accounts and Records Property of Fund. IFTC acknowledges that all
of the accounts and records maintained by IFTC pursuant hereto
are the property of Fund, and will be made available to Fund for
inspection or reproduction within a reasonable period of time,
upon demand. IFTC will assist Fund's independent auditors, or
upon the prior written approval of Fund, or upon demand, any
regulatory body, in any requested review of Fund's accounts and
records, provided that Fund will reimburse IFTC for all expenses
and employee time invested in any such review outside of routine
and normal periodic reviews. Upon receipt from Fund of the
necessary information or instructions, IFTC will supply
information from the books and records it maintains for Fund that
Fund may reasonably request for tax returns, questionnaires,
periodic reports to shareholders and such other reports and
information requests as Fund and IFTC may agree upon from time to
time.
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S. Adoption of Procedures. IFTC and Fund hereby adopt the Funds
Transfer Operating Guidelines attached hereto as Exhibit B. IFTC
and Fund may from time to time adopt such additional procedures
as they agree upon, and IFTC may conclusively assume that no
procedure approved or directed by Fund, Fund's or Portfolio's
accountants or other advisors conflicts with or violates any
requirements of the prospectus, declaration of trust, any
applicable law, rule or regulation, or any order, decree or
agreement by which Fund may be bound. Fund will be responsible
for notifying IFTC of any changes in statutes, regulations,
rules, requirements or policies which may impact IFTC's
responsibilities or procedures under this Agreement.
T. Advances. Fund will pay on demand any advance of cash or
securities made by IFTC or any Subcustodian, in its sole
discretion, for any purpose (including but not limited to
securities settlements, purchase or sale of foreign exchange or
foreign exchange contracts and assumed settlement) for the
benefit of any Portfolio. Any such cash advance will be subject
to an overdraft charge at the rate set forth in the then-current
fee schedule from the date advanced until the date repaid. As
security for each such advance, Fund hereby grants IFTC and such
Subcustodian a lien on and security interest in all Assets at any
time held for the account of the applicable Portfolio, including
without limitation all Assets acquired with the amount advanced.
Should Fund fail to promptly repay the advance, IFTC and such
Subcustodian may utilize available cash and dispose of such
Portfolio's Assets pursuant to applicable law to the extent
necessary to obtain reimbursement of the amount advanced and any
related overdraft charges.
U. Exercise of Rights; Tender Offers. Upon receipt of Instructions,
IFTC will: (1) deliver warrants, puts, calls, rights or similar
securities to the issuer or trustee thereof, or to the agent of
such issuer or trustee, for the purpose of exercise or sale,
provided that the new Assets, if any, are to be delivered to
IFTC; and (2) deposit securities upon invitations for tenders
thereof, provided that the consideration for such securities is
to be paid or delivered to IFTC or the tendered securities are to
be returned to IFTC.
V. Fund Shares.
1. Fund will deliver to IFTC Instructions with respect to the
declaration and payment of any dividend or other
distribution on the shares of capital stock of a Portfolio
("Fund Shares") by a Portfolio. On the date specified in
such Instruction, IFTC will pay out of the monies held for
the account of the Portfolio, insofar as it is available for
such purposes, and credit to the account of the Dividend
Disbursing Agent for the Portfolio, the amount specified in
such Instructions.
2. Whenever Fund Shares are repurchased or redeemed by a
Portfolio, Portfolio or its agent will give IFTC
Instructions regarding the aggregate dollar amount to be
paid for such shares. Upon receipt of such Instruction, IFTC
will charge such aggregate dollar amount to the account of
the Portfolio and either deposit the same in the account
maintained for the purpose of paying for the repurchase or
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redemption of Fund Shares or deliver the same in accordance
with such Instruction. IFTC has no duty or responsibility to
determine that Fund Shares have been removed from the proper
shareholder accounts or that the proper number of Fund
Shares have been canceled and removed from the shareholder
records.
3. Whenever Fund Shares are purchased from Fund, Fund will
deposit or cause to be deposited with IFTC the amount
received for such shares. IFTC has no duty or responsibility
to determine that Fund Shares purchased from Fund have been
added to the proper shareholder account or that the proper
number of such shares have been added to the shareholder
records.
4. INSTRUCTIONS.
A. The term "Instructions", as used herein, means written (including
telecopied, telexed, or electronically transmitted) or oral
instructions which IFTC reasonably believes were given by a designated
representative of Fund. Fund will deliver to IFTC, prior to delivery
of any Assets to IFTC and thereafter from time to time as changes
therein are necessary, written Instructions naming one or more
designated representatives to give Instructions in the name and on
behalf of Fund, which Instructions may be received and accepted by
IFTC as conclusive evidence of the authority of any designated
representative to act for Fund and may be considered to be in full
force and effect until receipt by IFTC of notice to the contrary.
Unless such written Instructions delegating authority to any person to
give Instructions specifically limit such authority to specific
matters or require that the approval of anyone else will first have
been obtained, IFTC will be under no obligation to inquire into the
right of such person, acting alone, to give any Instructions
whatsoever. If Fund fails to provide IFTC any such Instructions naming
designated representatives, any Instructions received by IFTC from a
person reasonably believed to be an appropriate representative of Fund
will constitute valid and proper Instructions hereunder. The term
"designated representative" may include Fund's or a Portfolio's
employees and agents, including investment managers and their
employees.
B. No later than the next business day immediately following each oral
Instruction, Fund will send IFTC written confirmation of such oral
Instruction. At IFTC's sole discretion, IFTC may record on tape, or
otherwise, any oral Instruction whether given in person or via
telephone, each such recording identifying the date and the time of
the beginning and ending of such oral Instruction.
C. Fund will provide, upon IFTC's request a certificate signed by an
officer or designated representative of Fund, as conclusive proof of
any fact or matter required to be ascertained from Fund hereunder.
Fund will also provide IFTC Instructions with respect to any matter
concerning this Agreement requested by IFTC. If IFTC reasonably
believes that it could not prudently act according to the
Instructions, or the instruction or advice of Fund's or a Portfolio's
accountants or counsel, it may in its discretion, with notice to Fund,
not act according to such Instructions.
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5. LIMITATION OF LIABILITY OF IFTC. IFTC is not responsible or liable for, and
Fund will indemnify and hold IFTC harmless from and against, any and all
costs, expenses, losses, damages, charges, counsel fees (including, without
limitation, disbursements and the allocable cost of in-house counsel),
payments and liabilities which may be asserted against or incurred by IFTC
or for which IFTC may be held to be liable, arising out of or attributable
to:
A. IFTC's action or failure to act pursuant hereto; provided that IFTC
has acted in good faith and with reasonable care; and provided
further, that, in no event is IFTC liable for consequential, special,
or punitive damages;
B. IFTC's payment of money as requested by Fund, or the taking of any
action which might make it or its nominee liable for payment of monies
or in any other way; provided, however, that nothing herein obligates
IFTC to take any such action or expend its own monies except in its
sole discretion;
C. IFTC's action or failure to act hereunder upon any Instructions,
advice, notice, request, consent, certificate or other instrument or
paper appearing to it to be genuine and to have been properly
executed, including any Instruction, communications, data or other
information received by IFTC by means of the Systems, as hereinafter
defined, or any electronic system of communication;
D. IFTC's action or failure to act in good faith reliance on the advice
or opinion of counsel for Fund or of its own counsel with respect to
questions or matters of law, which advice or opinion may be obtained
by IFTC at the expense of Fund, or on the Instruction, advice or
statements of any officer or employee of Fund, or Fund's accountants
or other authorized individuals, and other persons believed by it in
good faith to be expert in matters upon which they are consulted;
E. The purchase or sale of any securities or foreign currency positions.
Without limiting the generality of the foregoing, IFTC is under no
duty or obligation to inquire into:
1. The validity of the issue of any securities purchased by or for
any Portfolio, or the legality of the purchase thereof or of
foreign currency positions, or evidence of ownership required by
Fund to be received by IFTC, or the propriety of the decision to
purchase or the amount paid therefor;
2. The legality of the sale of any securities or foreign currency
positions by or for any Portfolio, or the propriety of the amount
for which the same are sold; or
3. The legality of the issue or sale of any Fund Shares, or the
sufficiency of the amount to be received therefor, the legality
of the repurchase or redemption of any Fund Shares, or the
propriety of the amount to be paid therefor, or the legality of
the declaration of any dividend by Fund, or the legality of the
issue of any Fund Shares in payment of any stock dividend.
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F. Any error, omission, inaccuracy or other deficiency in any Portfolio's
accounts and records or other information provided to IFTC by or on
behalf of a Portfolio, or the failure of Fund to provide, or provide
in a timely manner, any accounts, records, or information needed by
IFTC to perform its duties hereunder;
G. Fund's refusal or failure to comply with the terms hereof (including
without limitation Fund's failure to pay or reimburse IFTC under
Section 5 hereof), Fund's negligence or willful misconduct, or the
failure of any representation or warranty of Fund hereunder to be and
remain true and correct in all respects at all times;
H. The use or misuse, whether authorized or unauthorized, of the Systems
or any electronic system of communication used hereunder, by Fund or
by any person who acquires access to the Systems or such other systems
through the terminal device, passwords, access instructions or other
means of access to such Systems or such other system which are
utilized by, assigned to or otherwise made available to Fund, except
to the extent attributable to any negligence or willful misconduct by
IFTC;
I. Any money represented by any check, draft, wire transfer,
clearinghouse funds, uncollected funds, or instrument for the payment
of money to be received by IFTC on behalf of a Portfolio until
actually received; provided, however, that IFTC will advise Fund
promptly if it fails to receive any such money in the ordinary course
of business and will cooperate with Fund toward the end that such
money is received;
J. Except as provided in Section 3.P hereof, loss occasioned by the acts,
omissions, defaults or insolvency of any broker, bank, trust company,
securities system or any other person with whom IFTC may deal; and
K. The failure or delay in performance of its obligations hereunder, or
those of any entity for which it is responsible hereunder, arising out
of or caused, directly or indirectly, by circumstances beyond the
affected entity's reasonable control, including, without limitation:
any interruption, loss or malfunction of any utility, transportation,
computer (hardware or software) or communication service; inability to
obtain labor, material, equipment or transportation, or a delay in
mails; governmental or exchange action, statute, ordinance, rulings,
regulations or direction; war, strike, riot, emergency, civil
disturbance, terrorism, vandalism, explosions, labor disputes,
freezes, floods, fires, tornadoes, acts of God or public enemy,
revolutions, or insurrection.
6. COMPENSATION. In consideration for its services hereunder, Fund will pay to
IFTC the compensation set forth in a separate fee schedule, incorporated
herein by reference, to be agreed to by Fund and IFTC from time to time,
and, upon demand, reimbursement for IFTC's cash disbursements and
reasonable out-of-pocket costs and expenses, including attorney's fees and
disbursements, incurred by IFTC in connection with the performance of
services hereunder. IFTC may charge such compensation against monies held
by it for the account of the Portfolios. IFTC will also be entitled to
charge against any monies held by it for the account of the Portfolios the
amount of any loss, damage, liability, advance, overdraft or expense for
which it is entitled to reimbursement from Fund, including but not limited
to fees and expenses due to IFTC for other services provided to Fund by
16
IFTC. IFTC will be entitled to reimbursement by Fund for the losses,
damages, liabilities, advances, overdrafts and expenses of Subcustodians
only to the extent that (a) IFTC would have been entitled to reimbursement
hereunder if it had incurred the same itself directly, and (b) IFTC is
obligated to reimburse the Subcustodian therefor.
7. TERM AND TERMINATION. The initial term of this Agreement is for a period of
one (1) year. Thereafter, either Fund or IFTC may terminate this Agreement
by notice in writing, delivered or mailed, postage prepaid, to the other
party and received not less than ninety (90) days prior to the date upon
which such termination will take effect. Upon termination hereof:
A. Fund will pay IFTC its fees and compensation due hereunder and its
reimbursable disbursements, costs and expenses paid or incurred to
such date;
B. Fund will designate a successor custodian by Instruction to IFTC by
the termination date. In the event no such Instruction has been
delivered to IFTC on or before the date when such termination becomes
effective, then IFTC may, at its option, (i) choose as successor
custodian a bank or trust company meeting the qualifications for
custodian set forth in the 1940 Act and having not less than Two
Million Dollars ($2,000,000) aggregate capital, surplus and undivided
profits, as shown by its last published report, or (ii) apply to a
court of competent jurisdiction for the appointment of a successor or
other proper relief, or take any other lawful action under the
circumstances; provided, however, that Fund will reimburse IFTC for
its costs and expenses, including reasonable attorney's fees, incurred
in connection therewith; and
C. IFTC will, upon payment of all sums due to IFTC from Fund hereunder or
otherwise, deliver all Assets, duly endorsed and in form for transfer,
to the successor custodian, or as specified by the court, at IFTC's
office. IFTC will co-operate in effecting changes in book-entries at
all Depositories. Upon delivery to a successor or as specified by the
court, IFTC will have no further obligations or liabilities hereunder.
Thereafter such successor will be the successor hereunder and will be
entitled to reasonable compensation for its services.
In the event that Assets remain in the possession of IFTC after the
date of termination hereof for any reason other than IFTC's failure to
deliver the same, IFTC is entitled to compensation as provided in the
then-current fee schedule for its services during such period, and the
provisions hereof relating to the duties and obligations of IFTC will
remain in full force and effect.
8. NOTICES. Notices, requests, instructions and other writings addressed to
Fund at the address set forth above, or at such other address as Fund may
have designated to IFTC in writing, will be deemed to have been properly
given to Fund hereunder. Notices, requests, Instructions and other writings
addressed to IFTC at the address set forth above, Attention: Custody
Department, or to such other address as it may have designated to Fund in
writing, will be deemed to have been properly given to IFTC hereunder.
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9. THE SYSTEMS; CONFIDENTIALITY.
A. If IFTC provides Fund direct access to the computerized investment
portfolio custody systems used by IFTC ("Systems") or if IFTC and Fund
agree to utilize any electronic system of communication, Fund agrees
to implement and enforce appropriate security policies and procedures
to prevent unauthorized or improper access to or use of the Systems or
such other system.
B. Fund will preserve the confidentiality of the Systems and the tapes,
books, reference manuals, instructions, records, programs,
documentation and information of, and other materials relevant to, the
Systems and the business of IFTC or its affiliates ("Confidential
Information"). Fund agrees that it will not voluntarily disclose any
such Confidential Information to any other person other than its own
employees who reasonably have a need to know such information pursuant
hereto. Fund will return all such Confidential Information to IFTC
upon termination or expiration hereof.
C. Fund has been informed that the Systems are licensed for use by IFTC
and its affiliates from one or more third parties ("Licensors"), and
Fund acknowledges that IFTC and Licensors have proprietary rights in
and to the Systems and all other IFTC or Licensor programs, code,
techniques, know-how, data bases, supporting documentation, data
formats, and procedures, including without limitation any changes or
modifications made at the request or expense or both of Fund
(collectively, the "Protected Information"). Fund acknowledges that
the Protected Information constitutes confidential material and trade
secrets of IFTC and Licensors. Fund will preserve the confidentiality
of the Protected Information, and Fund hereby acknowledges that any
unauthorized use, misuse, disclosure or taking of Protected
Information, residing or existing internal or external to a computer,
computer system, or computer network, or the knowing and unauthorized
accessing or causing to be accessed of any computer, computer system,
or computer network, may be subject to civil liabilities and criminal
penalties under applicable law. Fund will so inform employees and
agents who have access to the Protected Information or to any computer
equipment capable of accessing the same. Licensors are intended to be
and are third party beneficiaries of Fund's obligations and
undertakings contained in this Section.
D. Fund hereby represents and warrants to IFTC that it has determined to
its satisfaction that the Systems are appropriate and suitable for its
use. THE SYSTEMS ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. IFTC
EXPRESSLY DISCLAIMS ALL WARRANTIES INCLUDING, BUT NOT LIMITED TO, THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE, EXCEPT THOSE WARRANTIES STATED EXPRESSLY HEREIN.
10. MULTIPLE PORTFOLIOS. If Fund is comprised of more than one Portfolio, the
following provisions apply:
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A. Each Portfolio will be regarded for all purposes hereunder as a
separate party apart from each other Portfolio. Unless the context
otherwise requires, with respect to every transaction covered hereby,
every reference herein to Fund is deemed to relate solely to the
particular Portfolio to which such transaction relates. Under no
circumstances will the rights, obligations or remedies with respect to
a particular Portfolio constitute a right, obligation or remedy
applicable to any other Portfolio. The use of this single document to
memorialize the separate agreement as to each Portfolio is understood
to be for clerical convenience only and will not constitute any basis
for joining the Portfolios for any reason.
B. Fund may appoint IFTC as its custodian for additional Portfolios from
time to time by written notice, provided that IFTC consents to such
addition. Rates or charges for each additional Portfolio will be as
agreed upon by IFTC and Fund in writing.
11. MISCELLANEOUS.
A. This Agreement will be construed according to, and the rights and
liabilities of the parties hereto will be governed by, the laws of the
State of Missouri, without reference to the choice of laws principles
thereof.
B. All terms and provisions hereof will be binding upon, inure to the
benefit of and be enforceable by the parties hereto and their
respective successors and permitted assigns.
C. The representations and warranties, the indemnifications extended
hereunder, and the provisions of Section 9 hereof are intended to and
will continue after and survive the expiration, termination or
cancellation hereof.
D. No provisions hereof may be amended or modified in any manner except
by a written agreement properly authorized and executed by each party
hereto.
E. The failure of either party to insist upon the performance of any
terms or conditions hereof or to enforce any rights resulting from any
breach of any of the terms or conditions hereof, including the payment
of damages, will not be construed as a continuing or permanent waiver
of any such terms, conditions, rights or privileges, but the same will
continue and remain in full force and effect as if no such forbearance
or waiver had occurred. No waiver, release or discharge of any party's
rights hereunder will be effective unless contained in a written
instrument signed by the party sought to be charged.
F. The captions herein are included for convenience of reference only,
and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
G. This Agreement may be executed in two or more counterparts, each of
which is deemed an original but all of which together constitute one
and the same instrument.
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H. If any provision hereof is determined to be invalid, illegal, in
conflict with any law or otherwise unenforceable, the remaining
provisions hereof will be considered severable and will not be
affected thereby, and every remaining provision hereof will remain in
full force and effect and will remain enforceable to the fullest
extent permitted by applicable law.
I. The benefits of this Agreement may not be assigned by either party nor
may either party delegate all or a portion of its duties hereunder
without the prior written consent of the other party. Notwithstanding
the foregoing, Fund agrees that IFTC may delegate all or a portion of
its duties to an affiliate of IFTC, provided that such delegation will
not reduce the obligations of IFTC under this Agreement.
J. Neither the execution nor performance hereof will be deemed to create
a partnership or joint venture by and between IFTC and Fund or any
Portfolio.
K. Except as specifically provided herein, this Agreement does not in any
way affect any other agreements entered into among the parties hereto
and any actions taken or omitted by either party hereunder will not
affect any rights or obligations of the other party hereunder.
L. Notice is hereby given that a copy of Fund's Trust Agreement and all
amendments thereto is on file with the Secretary of State of the state
of its organization; that this Agreement has been executed on behalf
of Fund by the undersigned duly authorized representative of Fund in
his/her capacity as such and not individually; and that the
obligations of this Agreement are binding only upon the assets and
property of Fund and not upon any trustee, officer of shareholder of
Fund individually.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers.
INVESTORS FIDUCIARY TRUST COMPANY PILGRIM MUTUAL FUNDS
By: By:
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Title: Title:
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