CUSTODIAN AGREEMENT
This Agreement between KOBRICK-HFS INVESTMENT TRUST, a business trust
organized and existing under the laws of Massachusetts with its principal place
of business at 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 (the "Fund"), and
STATE STREET BANK and TRUST COMPANY, a Massachusetts trust company with its
principal place of business at 000 Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000
(the "Custodian"),
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends that this Agreement be applicable to two series,
the Kobrick-HFS Capital Fund and Kobrick-HFS Emerging Growth Fund (such series
together with all other series subsequently established by the Fund and made
subject to this Agreement in accordance with Section 18, be referred to herein
as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
SECTION 1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Fund, including securities which the Fund, on behalf of
the applicable Portfolio desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Fund's
Declaration of Trust. The Fund on behalf of the Portfolio(s) agrees to deliver
to the Custodian all securities and cash of the Portfolios, and all payments of
income, payments of principal or capital distributions received by it with
respect to all securities owned by the Portfolio(s) from time to time, and the
cash consideration received by it for such new or treasury shares of beneficial
interest of the Fund representing interests in the Portfolios ("Shares") as may
be issued or sold from time to time. The Custodian shall not be responsible for
any property of a Portfolio held or received by the Portfolio and not delivered
to the Custodian.
Upon receipt of "Proper Instructions" (as such term is defined in Section
6 hereof), the Custodian shall on behalf of the applicable Portfolio(s) from
time to time employ one or more sub-custodians located in the United States, but
only in accordance with an applicable vote by the Board of Trustees of the Fund
(the "Board of Trustees") on behalf of the applicable Portfolio(s), and provided
that the Custodian shall have no more or less responsibility or liability to the
Fund on account of any actions or omissions of any sub-custodian so employed
than any such sub-custodian has to the Custodian. The Custodian may employ as
sub-custodian for the Fund's foreign securities on behalf of the applicable
Portfolio(s) the foreign banking institutions
and foreign securities depositories designated in Schedules A and B hereto but
only in accordance with the applicable provisions of Sections 3 and 4.
SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD
BY THE CUSTODIAN IN THE UNITED STATES
SECTION 2.1 HOLDING SECURITIES. The Custodian shall hold and physically
segregate for the account of each Portfolio all non-cash property, to be held by
it in the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to Section
2.8 in a clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the Treasury (each, a
"U.S. Securities System") and (b) commercial paper of an issuer for which State
Street Bank and Trust Company acts as issuing and paying agent ("Direct Paper")
which is deposited and/or maintained in the Direct Paper System of the Custodian
(the "Direct Paper System") pursuant to Section 2.9.
SECTION 2.2 DELIVERY OF SECURITIES. The Custodian shall release and
deliver domestic securities owned by a Portfolio held by the Custodian or in a
U.S. Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("Direct Paper System Account") only upon
receipt of Proper Instructions on behalf of the applicable Portfolio, which may
be continuing instructions when deemed appropriate by the parties, and only in
the following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a U.S. Securities System,
in accordance with the provisions of Section 2.8 hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of
the Portfolio or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.7 or into the name or nominee name of any
sub-custodian appointed pursuant to Section 1; or for exchange for a
different number of bonds, certificates or other evidence
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representing the same aggregate face amount or number of units;
provided that, in any such case, the new securities are to be
delivered to the Custodian;
7) Upon the sale of such securities for the account of the Portfolio,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom; provided
that in any such case, the Custodian shall have no responsibility or
liability for any loss arising from the delivery of such securities
prior to receiving payment for such securities except as may arise
from the Custodian's own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the securities of the issuer of such securities, or pursuant to
provisions for conversion contained in such securities, or pursuant
to any deposit agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar
securities or the surrender of interim receipts or temporary
securities for definitive securities; provided that, in any such
case, the new securities and cash, if any, are to be delivered to
the Custodian;
10) For delivery in connection with any loans of securities made by the
Portfolio, but only against receipt of adequate collateral as agreed
upon from time to time by the Custodian and the Fund on behalf of
the Portfolio, which may be in the form of cash or obligations
issued by the United States government, its agencies or
instrumentalities, except that in connection with any loans for
which collateral is to be credited to the Custodian's account in the
book-entry system authorized by the U.S. Department of the Treasury,
the Custodian will not be held liable or responsible for the
delivery of securities owned by the Portfolio prior to the receipt
of such collateral;
11) For delivery as security in connection with any borrowings by the
Fund on behalf of the Portfolio requiring a pledge of assets by the
Fund on behalf of the Portfolio, but only against receipt of amounts
borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Securities Exchange Act of 1934
(the "Exchange Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with transactions by the Portfolio of the Fund;
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13) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian, 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 Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent for the Fund
(the "Transfer Agent") for delivery to such Transfer Agent or to the
holders of Shares in connection with distributions in kind, as may
be described from time to time in the currently effective prospectus
and statement of additional information of the Fund related to the
Portfolio (the "Prospectus"), in satisfaction of requests by holders
of Shares for repurchase or redemption; and
15) For any other proper trust purpose, but only upon receipt of Proper
Instructions from the Fund on behalf of the applicable Portfolio
specifying the securities of the Portfolio to be delivered, setting
forth the purpose for which such delivery is to be made, declaring
such purpose to be a proper trust purpose, and naming the person or
persons to whom delivery of such securities shall be made.
SECTION 2.3 REGISTRATION OF SECURITIES. Domestic securities held by the
Custodian (other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the Portfolio
or of any nominee of the Custodian which nominee shall be assigned exclusively
to the Portfolio, unless the Fund has authorized in writing the appointment of a
nominee to be used in common with other registered investment companies having
the same investment adviser as the Portfolio, or in the name or nominee name of
any agent appointed pursuant to Section 2.7 or in the name or nominee name of
any sub-custodian appointed pursuant to Section 1. All securities accepted by
the Custodian on behalf of the Portfolio under the terms of this Agreement shall
be in "street name" or other good delivery form. If, however, the Fund directs
the Custodian to maintain securities in "street name", the Custodian shall
utilize its best efforts only to timely collect income due the Fund on such
securities and to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls, maturities,
tender or exchange offers.
SECTION 2.4 BANK ACCOUNTS. The Custodian shall open and maintain a
separate bank account or accounts in the United States in the name of each
Portfolio of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Agreement, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or for
the account of the Portfolio, other than cash maintained by the Portfolio in a
bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940, as amended (the "1940 Act"). Funds held by the
Custodian for a Portfolio may be deposited by it to its credit as Custodian in
the Banking Department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be qualified to act as a
custodian under the 1940 Act and
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that each such bank or trust company and the funds to be deposited with each
such bank or trust company shall on behalf of each applicable Portfolio be
approved by vote of a majority of the Board of Trustees. Such funds shall be
deposited by the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
SECTION 2.5 COLLECTION OF INCOME. Subject to the provisions of Section 2.3
with respect to securities maintained in "street name," the Custodian shall
collect on a timely basis all income and other payments with respect to
registered domestic securities held hereunder to which each Portfolio shall be
entitled either by law or pursuant to custom in the securities business, and
shall collect on a timely basis all income and other payments with respect to
bearer domestic securities if, on the date of payment by the issuer, such
securities are held by the Custodian or its agent thereof and shall credit such
income, as collected, to such Portfolio's custodian account. Without limiting
the generality of the foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring presentation as and when
they become due and shall collect interest when due on securities held
hereunder. Income due each Portfolio on securities loaned pursuant to the
provisions of Section 2.2 (10) shall be the responsibility of the Fund. The
Custodian will have no duty or responsibility in connection therewith, other
than to provide the Fund with such information or data as may be necessary to
assist the Fund in arranging for the timely delivery to the Custodian of the
income to which the Portfolio is properly entitled.
SECTION 2.6 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions on
behalf of the applicable Portfolio, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay out monies of a
Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures contracts
or options on futures contracts for the account of the Portfolio but
only (a) against the delivery of such securities or evidence of
title to such options, futures contracts or options on futures
contracts to the Custodian (or any bank, banking firm or trust
company doing business in the United States or abroad which is
qualified under the 1940 Act to act as a custodian and has been
designated by the Custodian as its agent for this purpose)
registered in the name of the Portfolio or in the name of a nominee
of the Custodian referred to in Section 2.3 hereof or in proper form
for transfer; (b) in the case of a purchase effected through a U.S.
Securities System, in accordance with the conditions set forth in
Section 2.8 hereof; (c) in the case of a purchase involving the
Direct Paper System, in accordance with the conditions set forth in
Section 2.9; (d) in the case of repurchase agreements entered into
between the Fund on behalf of the Portfolio and the Custodian, or
another bank, or a broker-dealer which is a member of NASD, (i)
against delivery of the securities either in certificate form or
through an entry crediting the Custodian's account at the Federal
Reserve Bank with such securities or (ii) against delivery of the
receipt evidencing purchase by the Portfolio of securities owned by
the Custodian along with written evidence of the agreement by the
Custodian to repurchase such securities from the Portfolio or (e)
for transfer to a time deposit account of the
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Fund in any bank, whether domestic or foreign; such transfer may be
effected prior to receipt of a confirmation from a broker and/or the
applicable bank pursuant to Proper Instructions from the Fund as
defined herein;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued as set forth in
Section 5 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments for
the account of the Portfolio: interest, taxes, management,
accounting, transfer agent, trustee and legal fees, and operating
expenses of the Fund whether or not such expenses are to be in whole
or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares declared pursuant to
the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper trust purpose, but only upon receipt of Proper
Instructions from the Fund on behalf of the Portfolio specifying the
amount of such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a proper trust
purpose, and naming the person or persons to whom such payment is to
be made.
SECTION 2.7 APPOINTMENT OF AGENTS. The Custodian may at any time or times
in its discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the 1940 Act to act as a custodian, as
its agent to carry out such of the provisions of this Section 2 as the Custodian
may from time to time direct; provided, however, that the appointment of any
agent shall not relieve the Custodian of its responsibilities or liabilities
hereunder.
SECTION 2.8 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The
Custodian may deposit and/or maintain securities owned by a Portfolio in a
clearing agency registered with the United States Securities and Exchange
Commission (the "SEC") under Section 17A of the Exchange Act , which acts as a
securities depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively referred
to herein as "U.S. Securities System" in accordance with applicable Federal
Reserve Board and SEC rules and regulations, if any, and subject to the
following provisions:
1) The Custodian may keep securities of the Portfolio in a U.S.
Securities System provided that such securities are represented in
an account of the Custodian in the
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U.S. Securities System (the "U.S. Securities System Account") which
account shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System shall
identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for securities purchased for the account of
the Portfolio upon (i) receipt of advice from the U.S. Securities
System that such securities have been transferred to the U.S.
Securities System Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and transfer for
the account of the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon (i) receipt of
advice from the U.S. Securities System that payment for such
securities has been transferred to the U.S. Securities System
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account of
the Portfolio. Copies of all advices from the U.S. Securities System
of transfers of securities for the account of the Portfolio shall
identify the Portfolio, be maintained for the Portfolio by the
Custodian and be provided to the Fund at its request. Upon request,
the Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio in the form of a written advice or notice and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transactions in the U.S.
Securities System for the account of the Portfolio;
4) The Custodian shall provide the Fund with any report obtained by
the Custodian on the U.S. Securities System's accounting system,
internal accounting control and procedures for safeguarding
securities deposited in the U.S. Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial or annual certificate, as the case may be,
required by Section 15 hereof;
6) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting from use
of the U.S. Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents or
of any of its or their employees or from failure of the Custodian or
any such agent to enforce effectively such rights as it may have
against the U.S. Securities System; at the election of the Fund, it
shall be entitled to be subrogated to the rights of the Custodian
with respect to any claim against the U.S. Securities System or any
other person which the Custodian may have as a consequence of any
such loss or
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damage if and to the extent that the Portfolio has not been made
whole for any such loss or damage.
SECTION 2.9 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The
Custodian may deposit and/or maintain securities owned by a Portfolio in the
Direct Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions from the
Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct
Paper System only if such securities are represented in the Direct
Paper System Account, which account shall not include any assets of
the Custodian other than assets held as a fiduciary, custodian or
otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the account of
the Portfolio upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to the
account of the Portfolio. The Custodian shall transfer securities
sold for the account of the Portfolio upon the making of an entry on
the records of the Custodian to reflect such transfer and receipt of
payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio, in the form of a written advice or notice, of Direct
Paper on the next business day following such transfer and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transaction in the Direct
Paper System for the account of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the Portfolio with
any report on its system of internal accounting control as the Fund
may reasonably request from time to time.
SECTION 2.10 SEGREGATED ACCOUNT. The Custodian shall upon receipt of
Proper Instructions on behalf of each applicable Portfolio establish and
maintain a segregated account or accounts for and on behalf of each such
Portfolio, into which account or accounts may be transferred cash and/or
securities, including securities maintained in an account by the Custodian
pursuant to Section 2.8 hereof, (i) in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Exchange Act and a member of the NASD (or any
futures commission merchant registered under the
8
Commodity Exchange Act), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract market), or of
any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Portfolio, (ii) for purposes
of segregating cash or government securities in connection with options
purchased, sold or written by the Portfolio or commodity futures contracts or
options thereon purchased or sold by the Portfolio, (iii) for the purposes of
compliance by the Portfolio with the procedures required by Investment Company
Act Release No. 10666, or any subsequent release or releases of the SEC relating
to the maintenance of segregated accounts by registered investment companies and
(iv) for other proper trust purposes, but only, in the case of clause (iv), upon
receipt of Proper Instructions from the Fund on behalf of the applicable
Portfolio setting forth the purpose or purposes of such segregated account and
declaring such purpose(s) to be a proper trust purpose.
SECTION 2.11 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall
execute ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other payments with
respect to domestic securities of each Portfolio held by it and in connection
with transfers of securities.
SECTION 2.12 PROXIES. The Custodian shall, with respect to the domestic
securities held hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Portfolio such proxies, all proxy soliciting materials
and all notices relating to such securities. The Custodian shall in no event
vote such proxies in the absence of Proper Instructions from the Fund.
SECTION 2.13 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to
the provisions of Section 2.3 with respect to securities maintained in "street
name," the Custodian shall transmit promptly to the Fund for each Portfolio all
written information (including, without limitation, pendency of calls and
maturities of domestic securities and expirations of rights in connection
therewith and notices of exercise of call and put options written by the Fund on
behalf of the Portfolio and the maturity of futures contracts purchased or sold
by the Portfolio) received by the Custodian from issuers of the securities being
held for the Portfolio. With respect to tender or exchange offers, the Custodian
shall transmit promptly to the Portfolio all written information received by the
Custodian from issuers of the securities whose tender or exchange is sought and
from the party (or his agents) making the tender or exchange offer. If the
Portfolio desires to take action with respect to any tender offer, exchange
offer or any other similar transaction, the Portfolio shall notify the Custodian
at least three business days prior to the date on which the Custodian is to take
such action.
SECTION 3. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER OF THE PORTFOLIOS
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SECTION 3.1 DEFINITIONS. The following capitalized terms shall have
the indicated 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 promulgated under Section 17(f) of the 1940 Act ("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 as are reasonably necessary to effect the Portfolios'
transactions in such investments.
"Foreign Custody Manager" 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, on the Portfolios' behalf, determines to place Foreign Assets in a country
outside the United States (i) because 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.
SECTION 3.2 DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. The
Fund, by resolution adopted by the Board of Trustees, hereby delegates to the
Custodian with respect to the Portfolios, subject to Section (b) of Rule 17f-5,
the responsibilities set forth in this Section 3 with respect to Foreign Assets
of the Portfolios held outside the United States, and the Custodian hereby
accepts such delegation, as Foreign Custody Manager with respect to the
Portfolios.
SECTION 3.3 COUNTRIES COVERED. The Foreign Custody Manager shall be
responsible for performing the delegated responsibilities defined below only
with respect to the countries and custody arrangements for each such country
listed on Schedule A of this Contract, which may be amended from time to time by
the Foreign Custody Manager. The Foreign Custody Manager shall list on Schedule
A the Eligible Foreign Custodians selected by the Foreign Custody Manager to
maintain the assets of the Portfolios. Mandatory Securities Depositories are
listed on Schedule B to this Contract, which shall be amended from time to time
by the Foreign Custody Manager as necessary to reflect changes thereto. The
Foreign Custody Manager will provide amended versions of Schedules A and B in
accordance with Section 3.7 hereof.
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Upon the receipt by the Foreign Custody Manager of Proper Instructions to
open an account or to place or maintain Foreign Assets in a country listed on
Schedule A, and the fulfillment by the Fund on behalf of the Portfolios of the
applicable account opening requirements for the country, the Foreign Custody
Manager shall be deemed to have been delegated by the Board of Trustees on
behalf of the Portfolios responsibility as Foreign Custody Manager with respect
to that country and to have accepted such delegation. Following the receipt of
Proper Instructions directing the Foreign Custody Manager to close the account
of a Portfolio with the Eligible Foreign Custodian selected by the Foreign
Custody Manager in a designated country and compliance by the Foreign Custody
Manager with such Proper Instructions, the delegation by the Board of Trustees
on behalf of the Portfolios to the Custodian as Foreign Custody Manager for that
country shall be deemed to have been withdrawn and the Custodian shall
immediately cease to be the Foreign Custody Manager of the Portfolios with
respect to that country.
The Foreign Custody Manager 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, the Custodian shall have
no further responsibility as Foreign Custody Manager to the Fund with respect to
the country as to which the Custodian's acceptance of delegation is withdrawn.
SECTION 3.4 SCOPE OF DELEGATED RESPONSIBILITIES.
3.4.1. Selection of Eligible Foreign Custodians. Subject to the provisions
of this Section 3, the Portfolios' Foreign Custody Manager may place and
maintain the Foreign Assets in the care of the Eligible Foreign Custodian
selected by the Foreign Custody Manager in each country listed on Schedule A, as
amended from time to time.
In performing its delegated responsibilities as Foreign Custody Manager to
place or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign
Custody Manager shall 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 Assets will be held by that Eligible Foreign Custodian,
after considering all factors relevant to the safekeeping of such assets,
including, without limitation:
(i) the Eligible Foreign Custodian's practices, procedures, and internal
controls, including, but not limited to, the physical protections
available for certificated securities (if applicable), its methods
of keeping custodial records, and its security and data protection
practices;
(ii) whether the Eligible Foreign Custodian has the financial strength
to provide reasonable care for Foreign Assets;
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(iii) the Eligible Foreign Custodian's general reputation and standing
and, in the case of a foreign securities depository or clearing
agency which is not a Mandatory Securities Depository, the foreign
securities depository's or clearing agency's operating history and
the number of participants in the foreign securities depository or
clearing agency; and
(iv) whether the Fund will have jurisdiction over and be able to enforce
judgments against the Eligible Foreign Custodian, such as by virtue
of the existence of any offices of the Eligible Foreign Custodian in
the United States or the Eligible Foreign Custodian's consent to
service of process in the United States.
3.4.2. Contracts With Eligible Foreign Custodians. The Foreign Custody
Manager shall 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 Foreign
Custody Manager 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 shall include provisions that
provide:
(i) for indemnification or insurance arrangements (or any combination of
the foregoing) such that each Portfolio will be adequately protected
against the risk of loss of the Foreign Assets held in accordance
with such contract;
(ii) that the Foreign Assets will not be subject to any right, security
interest, or lien or claim of any kind in favor of the Eligible
Foreign Custodian or its creditors except a claim of payment for
their safe custody or administration or, in the case of cash
deposits, liens or rights in favor of creditors of the Eligible
Foreign Custodian arising under bankruptcy, insolvency, or similar
laws;
(iii) that beneficial ownership of the Foreign Assets will be freely
transferable without the payment of money or value other than for
safe custody or administration;
(iv) that adequate records will be maintained identifying the Foreign
Assets as belonging to the applicable Portfolio or as being held by
a third party for the benefit of such Portfolio;
(v) that the independent public accountants for each Portfolio will be
given access to those records or confirmation of the contents of
those records; and
(vi) that the Fund will receive periodic reports with respect to the
safekeeping of the Foreign Assets, including, but not limited to,
notification of any transfer of the Foreign Assets to or from a
Portfolio's account or a third party account containing the Foreign
Assets held for the benefit of the Portfolio,
12
or, in lieu of any or all of the provisions set forth in (i) through (vi) above,
such other provisions that the Foreign Custody Manager 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 (i) through (vi) above, in their
entirety.
3.4.3. Monitoring. In each case in which the Foreign Custody Manager
maintains Foreign Assets with an Eligible Foreign Custodian selected by the
Foreign Custody Manager, the Foreign Custody Manager shall establish a system to
monitor (i) the appropriateness of maintaining the Foreign Assets with such
Eligible Foreign Custodian and (ii) the contract governing the custody
arrangements established by the Foreign Custody Manager with the Eligible
Foreign Custodian. In the event the Foreign Custody Manager determines that the
custody arrangements with an Eligible Foreign Custodian it has selected are no
longer appropriate, the Foreign Custody Manager shall notify the Board of
Trustees in accordance with Section 3.7 hereunder.
SECTION 3.5 GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For
purposes of this Section 3, the Board of Trustees shall be deemed to have
considered and determined to accept such Country Risk as is incurred by placing
and maintaining the Foreign Assets in each country for which the Custodian is
serving as Foreign Custody Manager of the Portfolios. The Fund, on behalf of the
Portfolios, and the Custodian each expressly acknowledge that the Foreign
Custody Manager shall not be delegated any responsibilities under this Section 3
with respect to Mandatory Securities Depositories.
SECTION 3.6 STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF THE PORTFOLIOS.
In performing the responsibilities delegated to it, the Foreign Custody Manager
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.
SECTION 3.7 REPORTING REQUIREMENTS. The Foreign Custody Manager shall
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 of Trustees amended Schedules A or B at the end of the
calendar quarter in which an amendment to either Schedule has occurred. The
Foreign Custody Manager shall make written reports notifying the Board of
Trustees of any other material change in the foreign custody arrangements of the
Portfolios described in this Article 3 reasonably promptly after the occurrence
of the material change.
SECTION 3.8 REPRESENTATIONS WITH RESPECT TO RULE 17f-5. The Foreign
Custody Manager 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 the Custodian that, based
in part on information provided to it by the Custodian, the Board of Trustees
has determined that it is reasonable for the Board of Trustees to rely on the
Custodian to perform the responsibilities delegated pursuant to this Agreement
to the Custodian as the Foreign Custody Manager of the Portfolios.
13
SECTION 3.9 EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN
CUSTODY MANAGER. The Board of Trustees' delegation to the Custodian as Foreign
Custody Manager of the Portfolios shall be effective as of the date of execution
of this Agreement and shall 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 (30) days after
receipt by the non-terminating party of such notice. The provisions of Section
3.3 hereof shall govern the delegation to and termination of the Custodian as
Foreign Custody Manager of the Portfolios with respect to designated countries.
SECTION 4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE
PORTFOLIOS HELD OUTSIDE OF THE UNITED STATES
SECTION 4.1 DEFINITIONS. Capitalized terms in this Section 4 shall have
the following meanings:
"Foreign Securities System" means either a clearing agency or a securities
depository listed on Schedule A hereto or a Mandatory Securities Depository
listed on Schedule B hereto.
"Foreign Sub-Custodian" means a foreign banking institution serving as an
Eligible Foreign Custodian or a Permissible Foreign Custodian.
"Permissible Foreign Custodian" means any person with whom property of the
Portfolios may be placed and maintained outside of the United States under (i)
section 17(f) or 26(a) of the 1940 Act without regard to Rule 17f-5 or (ii) an
order of the SEC.
SECTION 4.2 HOLDING SECURITIES. The Custodian shall identify on its books
as belonging to the Portfolios the foreign securities held by each Foreign
Sub-Custodian or Foreign Securities System. The Custodian may hold foreign
securities for all of its customers, including the Portfolios, with any Foreign
Sub-Custodian in an account that is identified as belonging to the Custodian for
the benefit of its customers, provided however, that (i) the records of the
Custodian with respect to foreign securities of the Portfolios which are
maintained in such account shall identify those securities as belonging to the
Portfolios and (ii) the Custodian shall require that securities so held by the
Foreign Sub-Custodian be held separately from any assets of such Foreign
Sub-Custodian or of other customers of such Foreign Sub-Custodian.
SECTION 4.3 FOREIGN SECURITIES SYSTEMS. Foreign securities shall be
maintained in a Foreign Securities System in a designated country only through
arrangements implemented by the Foreign Sub-Custodian in such country pursuant
to the terms of this Agreement.
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SECTION 4.4 HOLDING OF FOREIGN ASSETS WITH PERMISSIBLE FOREIGN CUSTODIANS.
Subject to the requirements of Sections 17(f) and 26(a) of the 1940 Act (and any
other applicable law or order), the Custodian may place and maintain Foreign
Assets (as such term is defined in Section 3 hereof) in the care of any
Permissible Foreign Custodian. Section 3 hereof shall not apply to placement of
Foreign Assets by the Custodian with a Permissible Foreign Custodian.
SECTION 4.5 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
4.5.1. Delivery of Foreign Securities. The Custodian or a Foreign
Sub-Custodian shall release and deliver foreign securities of the Portfolios
held by such Foreign Sub-Custodian, or in a Foreign Securities System account,
only upon receipt of Proper Instructions, which may be continuing instructions
when deemed appropriate by the parties, and only in the following cases:
(i) upon the sale of such foreign securities for the Portfolios in
accordance with reasonable market practice in the country where such
foreign securities are held or traded, including, without
limitation: (A) delivery against expectation of receiving later
payment; or (B) in the case of a sale effected through a Foreign
Securities System in accordance with the rules governing the
operation of the Foreign Securities System;
(ii) in connection with any repurchase agreement related to foreign
securities;
(iii) to the depository agent in connection with tender or other
similar offers for foreign securities of the Portfolios;
(iv) to the issuer thereof or its agent when such foreign securities are
called, redeemed, retired or otherwise become payable;
(v) to the issuer thereof, or its agent, for transfer into the name of
the Custodian (or the name of the respective Foreign Sub-Custodian
or of any nominee of the Custodian or such Foreign Sub-Custodian) or
for exchange for a different number of bonds, certificates or other
evidence representing the same aggregate face amount or number of
units;
(vi) to brokers, clearing banks or other clearing agents for examination
or trade execution in accordance with market custom; provided that
in any such case the Foreign Sub-Custodian shall have no
responsibility or liability for any loss arising from the delivery
of such securities prior to receiving payment for such securities
except as may arise from the Foreign Sub-Custodian's own negligence
or willful misconduct;
(vii) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the securities of the issuer of
15
such securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
(viii) in the case of warrants, rights or similar foreign securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or temporary
securities for definitive securities;
(ix) or delivery as security in connection with any borrowings by the
Portfolios requiring a pledge of assets by the Portfolios;
(x) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(xi) in connection with the lending of foreign securities; and
(xii) for any other proper trust purpose, but only upon receipt of Proper
Instructions specifying the foreign securities to be delivered,
setting forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper trust purpose, and naming the
person or persons to whom delivery of such securities shall be made.
4.5.2. Payment of Portfolio Monies. Upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out, or direct the respective Foreign Sub-Custodian or the
respective Foreign Securities System to pay out, monies of a Portfolio in the
following cases only:
(i) upon the purchase of foreign securities for the Portfolio, unless
otherwise directed by Proper Instructions, by (A) delivering
money to the seller thereof or to a dealer therefor (or an agent
for such seller or dealer) against expectation of receiving later
delivery of such foreign securities; or (B) in the case of a
purchase effected through a Foreign Securities System, in
accordance with the rules governing the operation of such Foreign
Securities System;
(ii) in connection with the conversion, exchange or surrender of
foreign securities of the Portfolio;
(iii) for the payment of any expense or liability of the Portfolio,
including but not limited to the following payments: interest,
taxes, investment advisory fees, transfer agency fees, fees under
this Agreement, legal fees, accounting fees, and other operating
expenses;
(iv) for the purchase or sale of foreign exchange or foreign exchange
contracts for the Portfolio, including transactions executed with or
through the Custodian or its Foreign Sub-Custodians;
16
(v) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(vii) in connection with the borrowing or lending of foreign
securities; and
(viii) for any other proper trust purpose, but only upon receipt of Proper
Instructions specifying the amount of such payment, setting forth
the purpose for which such payment is to be made, declaring such
purpose to be a proper trust purpose, and naming the person or
persons to whom such payment is to be made.
4.5.3. Market Conditions; Market Information. Notwithstanding any
provision of this Agreement to the contrary, settlement and payment for Foreign
Assets received for the account of a Portfolio and delivery of Foreign Assets
maintained for the account of a Portfolio may be effected in accordance with the
customary established securities trading or processing practices and procedures
in the country or market in which the transaction occurs, including, without
limitation, delivering Foreign Assets to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) with the expectation of
receiving later payment for such Foreign Assets from such purchaser or dealer.
The Custodian shall provide to the Board of Trustees the information with
respect to custody and settlement practices in countries in which the Custodian
employs a Foreign Sub-Custodian, including without limitation information
relating to Foreign Securities Systems, described on Schedule C hereto at the
time or times set forth on such Schedule. The Custodian may revise Schedule C
from time to time, provided that no such revision shall result in the Board of
Trustees being provided with substantively less information than had been
previously provided hereunder.
SECTION 4.6 REGISTRATION OF FOREIGN SECURITIES. The foreign securities
maintained in the custody of a Foreign Custodian (other than bearer securities)
shall be registered in the name of the applicable Portfolio or in the name of
the Custodian or in the name of any Foreign Sub-Custodian or in the name of any
nominee of the foregoing, and the Fund on behalf of such Portfolio agrees to
hold any such nominee harmless from any liability as a holder of record of such
foreign securities. The Custodian or a Foreign Sub-Custodian shall not be
obligated to accept securities on behalf of a Portfolio under the terms of this
Agreement unless the form of such securities and the manner in which they are
delivered are in accordance with reasonable market practice.
SECTION 4.7 BANK ACCOUNTS. A bank account or bank accounts opened and
maintained outside the United States on behalf of a Portfolio with a Foreign
Sub-Custodian shall be subject only to draft or order by the Custodian or such
Foreign Sub-Custodian, acting pursuant to the terms of this Agreement to hold
cash received by or from or for the account of the Portfolio.
17
SECTION 4.8 COLLECTION OF INCOME. The Custodian shall use commercially
reasonable efforts to collect on a timely basis all income and other payments in
due course with respect to the Foreign Assets held hereunder to which the
Portfolios shall be entitled and shall credit such income, as collected, to the
applicable Portfolio. In the event that extraordinary measures are required to
collect such income, the Fund and the Custodian shall consult as to such
measures and as to the compensation and expenses of the Custodian relating to
such measures.
SECTION 4.9 PROXIES. The Custodian will use commercially reasonable
efforts with respect to the foreign securities held under this Section 4 use its
reasonable endeavors to facilitate the exercise of voting and other shareholder
proxy rights, subject always to the laws, regulations and practical constraints
that may exist in the country where such securities are issued. The Fund
acknowledges that local conditions, including lack of regulation, onerous
procedural obligations, lack of notice and other factors may have the effect of
severely limiting the ability of the Fund to exercise shareholder rights. The
Custodian shall in no event vote such proxies in the absence of Proper
Instructions from the Fund.
SECTION 4.10 COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The Custodian
shall transmit promptly to the Fund written information (including, without
limitation, pendency of calls and maturities of foreign securities and
expirations of rights in connection therewith) received by the Custodian via the
Foreign Sub-Custodians from issuers of the foreign securities being held for the
account of the Portfolios. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Fund written information so received by
the Custodian from issuers of the foreign securities whose tender or exchange is
sought or from the party (or its agents) making the tender or exchange offer.
The Custodian shall not be liable for any untimely exercise of any tender,
exchange or other right or power in connection with foreign securities or other
property of the Portfolios at any time held by it unless (i) the Custodian or
the respective Foreign Sub-Custodian is in actual possession of such foreign
securities or property and (ii) the Custodian receives Proper Instructions with
regard to the exercise of any such right or power, and both (i) and (ii) occur
at least three (3) business days prior to the date on which the Custodian is to
take action to exercise such right or power.
SECTION 4.11 LIABILITY OF FOREIGN SUB-CUSTODIANS AND FOREIGN SECURITIES
SYSTEMS. Each agreement pursuant to which the Custodian employs as a Foreign
Sub-Custodian shall, to the extent possible, require the Foreign Sub-Custodian
to exercise reasonable care in the performance of its duties and, to the extent
possible, to indemnify, and hold harmless, the Custodian, the Fund and the
Portfolios from and against any loss, damage, cost, expense, liability or claim
arising out of or in connection with the Foreign Sub-Custodian's performance of
such obligations. At the Fund's election, the Portfolios shall be entitled to be
subrogated to the rights of the Custodian with respect to any claims against a
Foreign Sub-Custodian as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Portfolios have not been made
whole for any such loss, damage, cost, expense, liability or claim.
18
SECTION 4.12 TAX LAW. The Custodian shall have no responsibility or
liability for any obligations now or hereafter imposed on the Fund, the
Portfolios or the Custodian as custodian of the Portfolios by the tax law of the
United States or of any state or political subdivision thereof. With respect to
jurisdictions other than the United States, the sole responsibility of the
Custodian with regard to the tax law of any such jurisdiction shall be to use
reasonable efforts to (a) notify the Fund of the obligations imposed on the Fund
or the Custodian as custodian of the Fund by the tax law of such jurisdictions,
including responsibility for withholding and other taxes, assessment or other
governmental charges, certifications and government reporting and (b) perform
such ministerial steps as are required to collect any tax refund, to ascertain
the appropriate rate of tax withholding and to provide such documents as may be
required to enable each Fund to receive appropriate tax treatment under
applicable tax laws and any applicable treaty provisions. The Custodian, in
performance of its duties under this Section, shall be entitled to treat each
Fund as a Massachusetts business trust which is "registered investment company"
under the laws of the United States, and it shall be the duty of each Fund to
inform the Custodian of any change in the organization, domicile or, to the
extent within the knowledge of the Fund, other relevant facts concerning tax
treatment of the Fund and further to inform the Custodian if the Fund is or
becomes the beneficiary of any special ruling or treatment not applicable to the
general nationality and category of entity of which the Fund is a part under
general laws and treaty provisions. The Custodian shall be entitled to rely on
any information supplied by each Fund. The Custodian may engage reasonable
professional advisors disclosed to the Fund by the Custodian, which may include
attorneys, accountants or financial institutions in the regular business of
investment administration and may rely upon advice received therefrom.
SECTION 4.13 CONFLICT. If the Custodian is delegated the responsibilities
of Foreign Custody Manager pursuant to the terms of Section 3 hereof, in the
event of any conflict between the provisions of Sections 3 and 4 hereof, the
provisions of Section 3 shall prevail.
SECTION 5. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent and, within a commercially reasonable time frame, deposit
into the account of the appropriate Portfolio such payments as are received for
Shares thereof issued or sold from time to time by the Fund. The Custodian will
provide timely notification to the Fund on behalf of each such Portfolio and the
Transfer Agent of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Fund's Declaration of Trust and any applicable votes of the
Board of Trustees pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of
19
Shares, the Custodian is authorized upon receipt of instructions
from the Transfer Agent to wire funds to or through a commercial bank designated
by the redeeming shareholders. In connection with the redemption or repurchase
of Shares, the Custodian shall honor checks drawn on the Custodian by a holder
of Shares, which checks have been furnished by the Fund to the holder of Shares,
when presented to the Custodian in accordance with such procedures and controls
as are mutually agreed upon from time to time between the Fund and the
Custodian.
SECTION 6. PROPER INSTRUCTIONS
Proper Instructions as used throughout this Agreement means a writing
signed or initialed by one or more person or persons as the Board of Trustees
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Trustees accompanied
by a detailed description of procedures approved by the Board of Trustees,
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board of Trustees and
the Custodian are satisfied that such procedures afford adequate safeguards for
the Portfolios' assets. For purposes of this Section, Proper Instructions shall
include instructions received by the Custodian pursuant to any three - party
agreement which requires a segregated asset account in accordance with Section
2.10.
SECTION 7. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Agreement, provided that all such payments shall be accounted for to
the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Portfolio, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Portfolio except as
otherwise directed by the Board of Trustees.
20
SECTION 8. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon Proper Instructions and
any other reasonable instructions, notices, requests, consents, certificates or
other instruments or papers reasonably believed by it to be genuine and to have
been properly executed by or on behalf of the Fund. The Custodian may receive
and accept a resolution of the Board of Trustees or of the Executive Committee
thereof signed by an officer of the Fund and certified by the Secretary or an
Assistant Secretary thereof (a "Certified Resolution") as conclusive evidence
(a) of the authority of any person to act in accordance with such resolution or
(b) of any determination or of any action by the Board of Trustees pursuant to
the Fund's Declaration of Trust as described in such resolution, and such
resolution may be considered as in full force and effect until receipt by the
Custodian of written notice to the contrary.
SECTION 9. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME
The Custodian shall keep the books of account of each Portfolio and
compute the net asset value per Share of the outstanding Shares. The Custodian
shall also calculate daily the net income of the Portfolio as described in the
Prospectus and shall advise the Fund and the Transfer Agent daily of the total
amounts of such net income and, if instructed in writing by an officer of the
Fund to do so, shall advise the Transfer Agent periodically of the division of
such net income among its various components. The calculations of the net asset
value per Share and the daily income of each Portfolio shall be made at the time
or times described from time to time in the Prospectus.
SECTION 10. RECORDS
The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Agreement in such
manner as will meet the obligations of the Fund under the 1940 Act, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder.
All such records shall be the property of the Fund and shall at all times during
the regular business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees and agents of
the SEC. The Custodian shall (i) at the Fund's request supply the Fund with a
tabulation of securities owned by each Portfolio and held by the Custodian and
(ii), when requested to do so by the Fund and for such compensation as shall be
agreed upon from time to time between the Fund and the Custodian, include
certificate numbers in such tabulations.
SECTION 11. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
21
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio may from time to time request, to obtain from year to
year favorable opinions from the Fund's independent accountants with respect to
its activities hereunder in connection with the preparation of the Fund's Form
N-1A, and Form N-SAR or other annual reports to the SEC and with respect to any
other requirements thereof.
SECTION 12. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each of the Portfolios
at such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a U.S. Securities
System or a Foreign Securities System (collectively referred to herein as the
"Securities Systems"), relating to the services provided by the Custodian under
this Agreement; such reports, shall be of sufficient scope and in sufficient
detail, as may reasonably be required by the Fund to provide reasonable
assurance that any material inadequacies would be disclosed by such examination,
and, if there are no such inadequacies, the reports shall so state.
SECTION 13. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to such reasonable compensation for its
services and expenses as Custodian as has been agreed to in writing as of the
date hereof, and as may be revised by the parties hereto from time to time.
SECTION 14. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Agreement and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Agreement,
but shall be kept indemnified by and shall be without liability to the Fund for
any action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. The Custodian shall be
without liability to the Fund and the Portfolios for any loss, liability, claim
or expense resulting from or caused by anything which is (A) part of Country
Risk (as defined in Section 3 hereof), including without limitation
nationalization, expropriation, currency
22
restrictions, or acts of war, revolution, riots or terrorism, or (B) part of the
"prevailing country risk" of the Portfolios, as such term is used in SEC Release
Nos. IC-22658; IS-1080 (May 12, 1997) or as such term or other similar terms are
now or in the future interpreted by the SEC or by the staff of the Division of
Investment Management thereof.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without liability to the Fund for any loss, liability,
claim or expense resulting from or caused by; (i) events or circumstances beyond
the reasonable control of the Custodian or any sub-custodian or Securities
System or any agent or nominee of any of the foregoing, including, without
limitation, the interruption, suspension or restriction of trading on or the
closure of any securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications disruptions, work
stoppages, natural disasters, or other similar events or acts; (ii) errors by
the Fund or the Investment Advisor in their instructions to the Custodian
provided such instructions have been in accordance with this Agreement; (iii)
the insolvency of or acts or omissions by a Securities System; (iv) any delay or
failure of any broker, agent or intermediary, central bank or other commercially
prevalent payment or clearing system to deliver to the Custodian's sub-custodian
or agent securities purchased or in the remittance or payment made in connection
with securities sold; (v) any delay or failure of any company, corporation, or
other body in charge of registering or transferring securities in the name of
the Custodian, the Fund, the Custodian's sub-custodians, nominees or agents or
any consequential losses arising out of such delay or failure to transfer such
securities including non-receipt of bonus, dividends and rights and other
accretions or benefits; (vi) delays or inability to perform its duties due to
any disorder in market infrastructure with respect to any particular security or
Securities System; and (vii) any provision of any present or future law or
regulation or order of the United States of America, or any state thereof, or
any other country, or political subdivision thereof or of any court of competent
jurisdiction.
The Custodian shall be liable for the acts or omissions of a Foreign
Sub-Custodian (as defined in Section 4 hereof) to the same extent as set forth
with respect to sub-custodians generally in this Agreement.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, the purchase or sale of foreign exchange or of
contracts for foreign exchange, and assumed settlement), any property at any
time held for the account of the applicable Portfolio shall be security therefor
and should the Fund fail to repay the Custodian promptly, the Custodian shall be
23
entitled to utilize available cash and to dispose of such Portfolio's assets to
the extent necessary to obtain reimbursement.
In the event that the Custodian or its nominee shall incur or be assessed
any taxes, charges, expenses, assessments, claims or liabilities in connection
with the performance of this Agreement (except such as may (i) arise from its or
its nominee's own negligent action, negligent failure to act or willful
misconduct, or (ii) be attributable to the normal expenses associated to the
operation of the Custodian's or its nominees' respective businesses), any
property at any time held for the account of the applicable Portfolio shall be
security therefor and the Custodian shall (a) provide the Fund with two (2) New
York business days notice with respect thereto and (b), in the event such matter
has not been resolved within such time, be entitled to utilize available cash
and to dispose of the applicable Portfolio s assets to the extent necessary to
obtain reimbursement.
Upon the Custodian becoming aware in the course of the performance of its
duties hereunder of the occurrence of any event with respect to the assets of
the Fund held by the Custodian or its sub-custodian or agent hereunder which
causes or may cause any loss, damage, cost, expense or other liability to the
Fund, the Custodian shall reasonably promptly notify an authorized person of the
Fund and, at the Fund s request, assist the Fund in taking commercially
reasonable steps under the circumstances to mitigate the effects of such event
and to avoid continuing harm to the Fund. If the steps referred to in the
previous sentence would be, in the reasonable determination of the Custodian,
beyond the normal scope of the Custodian s services as a global custodian of
mutual fund assets, the taking of those steps shall be at the Fund s expense.
In no event shall the Custodian, the Fund or the Portfolios be liable for
indirect, special or consequential damages.
SECTION 15. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Agreement shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than sixty (60) days after the date of such delivery or mailing; provided,
however that the Custodian shall not with respect to a Portfolio act under
Section 2.8 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Trustees has approved the
initial use of a particular Securities System by such Portfolio, as required by
Rule 17f-4 under the 1940 Act and that the Custodian shall not with respect to a
Portfolio act under Section 2.9 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Trustees has approved the initial use of the Direct Paper System by such
Portfolio; provided further, however, that the Fund shall not amend or terminate
this Agreement in contravention of any applicable federal or state regulations,
or any provision of the Fund's
24
Declaration of Trust, and further provided, that the Fund on behalf of one or
more of the Portfolios may at any time by action of its Board of Trustees (i)
substitute another bank or trust company for the Custodian by giving notice as
described above to the Custodian, or (ii) immediately terminate this Agreement
in the event of the appointment of a conservator or receiver for the Custodian
by the Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction, or upon the Custodian's material breach of this Agreement.
Upon termination of the Agreement, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
SECTION 16. SUCCESSOR CUSTODIAN
If a successor custodian for one or more Portfolios shall be appointed by
the Board of Trustees, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed and in the
form for transfer, all securities of each applicable Portfolio then held by it
hereunder and shall transfer to an account of the successor custodian all of the
securities of each such Portfolio held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a Certified Resolution, deliver at the office of
the Custodian and transfer such securities, funds and other properties in
accordance with such resolution.
In the event that no written order designating a successor custodian or
Certified Resolution shall have been delivered to the Custodian on or before the
date when such termination shall become effective, then the Custodian shall have
the right to deliver to a bank or trust company, which is a "bank" as defined in
the 1940 Act, doing business in Boston, Massachusetts, or New York, New York, of
its own selection, having an aggregate capital, surplus, and undivided profits,
as shown by its last published report, of not less than $25,000,000, all
securities, funds and other properties held by the Custodian on behalf of each
applicable Portfolio and all instruments held by the Custodian relative thereto
and all other property held by it under this Agreement on behalf of each
applicable Portfolio, and to transfer to an account of such successor custodian
all of the securities of each such Portfolio held in any Securities System.
Thereafter, such bank or trust company shall be the successor of the Custodian
under this Agreement.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the Certified Resolution to appoint a successor
custodian, the Custodian shall be entitled to fair compensation for its services
during such period as the Custodian retains possession of such securities, funds
and other properties and the provisions of this Agreement relating to the duties
and obligations of the Custodian shall remain in full force and effect.
25
SECTION 17. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Agreement, the Custodian and the
Fund on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Agreement as
may in their joint opinion be consistent with the general tenor of this
Agreement. Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any applicable federal or
state regulations or any provision of the Fund's Declaration of Trust. No
interpretive or additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Agreement.
SECTION 18. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to Kobrick-HFS Capital Fund and Kobrick-HFS Emerging Growth Fund with
respect to which it desires to have the Custodian render services as custodian
under the terms hereof, it shall so notify the Custodian in writing, and if the
Custodian agrees in writing to provide such services, such series of Shares
shall become a Portfolio hereunder.
SECTION 19. MASSACHUSETTS LAW TO APPLY
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
SECTION 20. PRIOR AGREEMENTS
This Agreement supersedes and terminates, as of the date hereof, all prior
Agreements between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
SECTION 21. NOTICES.
Any notice, instruction or other instrument required to be given hereunder
may be delivered in person to the offices of the parties as set forth herein
during normal business hours or delivered prepaid registered mail or by telex,
cable or telecopy to the parties at the following addresses or such other
addresses as may be notified by any party from time to time.
To the Fund: KOBRICK-HFS INVESTMENT TRUST
26
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Telephone: 000-000-0000
Telecopy: 000-000-0000
To the Custodian: STATE STREET BANK AND TRUST COMPANY
Xxxxx Xxxxxx Building
000 Xxxxxxx Xxxxxx
Xxxxx Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Xx.
Telephone: 000-000-0000
Telecopy: 000-000-0000
Such notice, instruction or other instrument shall be deemed to have been
served in the case of a registered letter at the expiration of five business
days after posting, in the case of cable twenty-four hours after dispatch and,
in the case of telex, immediately on dispatch and if delivered outside normal
business hours it shall be deemed to have been received at the next time after
delivery when normal business hours commence and in the case of cable, telex or
telecopy on the business day after the receipt thereof. Evidence that the notice
was properly addressed, stamped and put into the post shall be conclusive
evidence of posting.
SECTION 22. REPRODUCTION OF DOCUMENTS
This Agreement and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
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SECTION 23. SHAREHOLDER COMMUNICATIONS ELECTION
SEC Rule 14b-2 requires banks which hold securities for the account of
customers to respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of that issuer held by
the bank unless the beneficial owner has expressly objected to disclosure of
this information. In order to comply with the rule, the Custodian needs the Fund
to indicate whether it authorizes the Custodian to provide the Fund's name,
address, and share position to requesting companies whose securities the Fund
owns. If the Fund tells the Custodian "no", the Custodian will not provide this
information to requesting companies. If the Fund tells the Custodian "yes" or
does not check either "yes" or "no" below, the Custodian is required by the rule
to treat the Fund as consenting to disclosure of this information for all
securities owned by the Fund or any funds or accounts established by the Fund.
For the Fund's protection, the Rule prohibits the requesting company from using
the Fund's name and address for any purpose other than corporate communications.
Please indicate below whether the Fund consents or objects by checking one of
the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [x] The Custodian is not authorized to release the Fund's name,
address, and share positions.
28
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of December , 1997].
KOBRICK-HFS INVESTMENT TRUST FUND SIGNATURE ATTESTED TO BY:
By: _________________________ By: ____________________
Name: Xxxxxxxxx X. Xxxxxxx Name: Xxxxxxx X. Xxxxxxx
Title: President Title: Secretary
STATE STREET BANK AND TRUST COMPANY SIGNATURE ATTESTED TO BY:
By: _________________________ By: ____________________
Name: Xxxxxx X. Xxxxx Name: Xxxxx Xxxxxx
-------------------------
Title: Executive Vice President Title: VP and Assoc. Counsel
-------------------------
(Exhibits previously filed)
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