CUSTODIAN AGREEMENT
AGREEMENT made as of this ____ day of ___________ 19____ between [ ]
(the "Fund") [on behalf of each of the portfolios listed on Appendix C hereto
as the same may be amended from time to time (each a "Fund" and collectively
the "Funds"),] and [ ] (the "Custodian").
WITNESSETH
WHEREAS the Fund is organized as a [ ] with one or
more series of shares, and is an open-end management investment company
registered with the Securities and Exchange Commission.
[WHEREAS each Fund represents an interest in a separate portfolio of cash,
securities and other assets (all references to a "Fund" or the "Funds" shall be
deemed to include each portfolio within the Fund as the context may make
appropriate).]
WHEREAS the Fund wishes to employ the Custodian and the Custodian has
agreed to provide custodial, banking and related services to the Fund in
accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Fund and the Custodian agree as follows:
1. APPOINTMENT OF CUSTODIAN. Upon the terms and conditions set forth in this
Agreement, the Fund hereby appoints the Custodian as a custodian, and the
Custodian
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hereby accepts such appointment. The Fund shall deliver or shall cause to be
delivered to the Custodian cash, securities and other property ("Property")
owned by the Fund from time to time during the term of this Agreement. The
Custodian shall be under no obligation to request or to require that any or all
Property of the Fund be delivered to it, and the Custodian shall have no
responsibility with respect to any Property not delivered to it.
[The Fund may in the future authorize the establishment of separate
accounts which hold Property of the Fund and with respect to which a certain
investment adviser or manager will be authorized to act and give instructions to
the Custodian (an "Investment Adviser"). The Fund shall notify the Custodian in
writing by a Proper Instruction of such authorization, whereupon the Custodian
may accept and act on Proper Instructions it reasonably believes to be sent by
such Investment Adviser.]
2. DEFINITIONS.
In this Agreement, the following words shall, unless the context otherwise
requires, have the following meanings:
(i) "1940 Act" - the Investment Company Act of 1940 and the rules and
regulations thereunder.
(ii) "Advances" - shall have the meaning ascribed to it in Section 11
hereof.
(iii) "Agency Accounts" - shall have the meaning ascribed to it in Section 5
hereof.
(iv) "Agent" - shall have the meaning ascribed to it in Section 7 hereof.
(v) "[ ] Accounts" - shall have the meaning ascribed to it in
Section 5 hereof.
(vi) "Book-Entry Agent" - shall have the meaning ascribed to it in
Section 4.1(b) hereof.
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(vii) "Derivative Instruments and Commodities" - any form of risk transfer
contract in which a gain or loss is recognized from fluctuations in
market price levels or rates, indexes or benchmarks, and which
includes without limitation futures, forwards, options, swaps, forward
rate and forward exchange contracts, leverage- or commodity-related
similar contracts and any other risk transfer contract whether traded
on or off an exchange.
(viii) "Electronic Instructions" - shall have the meaning ascribed to it in
Section 8.3 hereof.
(ix) "Electronic Reports" - shall have the meaning ascribed to it in
Section 8.3 hereof.
(x) "Force Majeure" - shall have the meaning ascribed to it in Section
10.4 hereof.
(xi) "Investments" - assets of the Fund, other than Property held by the
Custodian, a Subcustodian or a Securities Depository, but which the
Custodian may note on its records as being assets of the Fund
including without limitation Derivative Instruments and Commodities.
(xii) "Investment Adviser" - shall have the meaning ascribed to it in
Section 1 hereof.
(xiii) "Liability" - shall have the meaning ascribed to it in Section 11
hereof.
(xiv) "Margin Account" - shall have the meaning ascribed to it in
Section 4.2(d) hereof.
(xv) "Margin Agreement" - shall have the meaning ascribed to it in
Section 4.2(d) hereof.
(xvi) "Omnibus Accounts" - accounts established in the name of the Custodian
on behalf of its customers in which assets on deposit with the
Custodian by one or several customers may be deposited. Omnibus
Accounts may be established for the purpose of holding cash or
securities.
(xvii) "Proper Instructions" - any direction to take or not to take action in
respect of Property (including cash) or Investments which the
Custodian reasonably believes to be sent by an authorized person and
to be genuine. Proper Instructions may be
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sent via the media set forth in Section 6 hereof or as otherwise
agreed between the Custodian and the Fund.
(xviii) "Property" - shall have the meaning ascribed to it in Section 1
hereof.
(xix) "Securities Accounts" - shall have the meaning ascribed to it in
Section 4 hereof.
(xx) "Securities Depository" - a generally recognized book-entry system or
a clearing agency which acts as a securities depository in any country
in which securities are maintained under this Agreement and with which
the Custodian or a Subcustodian may maintain securities or other
Property owned by or held on behalf of the Fund, pursuant to the
provisions hereof, including Euroclear and Cedel.
(xxi) "Segregated Accounts" - shall have the meaning ascribed to it in
Section 4.2(d) hereof.
(xxii) "Subcustodian" - shall mean any subcustodian appointed pursuant to
Section 7 of this Agreement.
(xxiii) "Voluntary Corporate Actions" - corporate actions (as further
described in Section 8.4) in respect of portfolio securities of the
Fund which require an investment decision.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE FUND. The Fund represents
and warrants that the execution, delivery and performance by the Fund of this
Agreement are within the Fund's corporate, trust or other constitutive powers,
have been duly authorized by all necessary corporate, trust or other appropriate
action under its constitutive documents, and do not contravene or constitute a
default under any provision of applicable law or regulation or of the
constitutive documents of the Fund or of any agreement, judgment, injunction,
order, decree or other instrument binding upon the Fund. The Fund agrees to
inform the Custodian reasonably promptly if any statement set
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forth in this Section 3 or elsewhere made by the Fund in this Agreement ceases
to be true and correct. The Fund shall safeguard and shall solely be responsible
for the safekeeping of any testkeys, identification codes, other security
devices or statements of account with which the Custodian provides it. If and
when applicable, the Fund shall execute a license agreement or sublicense
agreement governing its use of any electronic instruction system proprietary to
the Custodian or an affiliate of the Custodian or proprietary to a third party
which has licensed such system to the Custodian or an affiliate of the
Custodian.
The Fund hereby represents and warrants that it has disclosed appropriately
and adequately, or will appropriately and adequately disclose, all material
investments risks, including without limitation those relating to the custody,
settlement or servicing of foreign securities in the markets in which the Fund
invests or intends to invests, to the shareholders or other investors in the
Fund or to other persons who have property or contractual rights to or interests
in the assets of the Fund which are the subject of this Custodian Agreement.
4. SECURITIES ACCOUNT. The Fund hereby authorizes the Custodian to open and
maintain, with itself or with Subcustodians, securities accounts (the
"Securities Account") and authorizes the Custodian to deposit or record, as the
case may be, in such Securities Account the Fund's Property delivered to and
accepted by the Custodian, or such other Investments as the Fund requests the
Custodian to record by notation only. The Custodian shall keep safely all
Property delivered to it. In the event of a loss of a security for which the
Custodian would be liable under the provisions of this Agreement, the Custodian
shall be responsible for either replacing the security or for reimbursing the
Fund the value of the security [as of the date the loss is first discovered by
the Fund or the Custodian]. The Securities Account shall be maintained in the
manner and on the terms set forth below.
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(All references in this Section to the Custodian shall include a Subcustodian,
Securities Depository or any agent of the Custodian.)
4.1 MANNER OF HOLDING OR RECORDING SECURITIES AND OTHER INVESTMENTS -
(a) SECURITIES REPRESENTED BY PHYSICAL CERTIFICATES - Securities
represented by share certificates or other instruments may be held in
registered or bearer form (i) in the Custodian's vault, (ii) in the vault
of a Subcustodian or other agent of the Custodian, (iii) in an account
maintained by the Custodian or a Subcustodian at a Securities Depository,
or (iv) in accordance with customary market practice in the Custodian's
discretion (x) in the country in which settlement is to occur or (y) for
the particular security in respect of which settlement is instructed.
Securities held at a Subcustodian will be held subject to the terms of
the Subcustodian Agreement in effect between the Custodian and the
Subcustodian and may be held in Omnibus Accounts.
Securities held in a Securities Depository will be held subject to the
agreement, rules, statement of terms and conditions or other document or
conditions effective between the Securities Depository and the Custodian or
the Subcustodian. Such securities shall be held (i) in an account which
contains only assets of the Custodian held as custodian or otherwise on
behalf of others if such account is maintained by the Custodian with a
Securities Depository (unless market practice or Securities Depository
rules and regulations require the Custodian also to hold its own assets in
such account), or (ii) in an account which contains only assets of the
Subcustodian or other agent held as custodian or otherwise on behalf of
others if such account is maintained by the Subcustodian or other agent
with a Securities Depository (unless market practice or Securities
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Depository rules and regulations require a Subcustodian also to hold its
own assets in such account).
Registered securities of the Fund may be registered in the name of the
Custodian, the Fund or a nominee of either of them and may be held in any
manner set forth above, with or without any indication of fiduciary
capacity, provided that securities are held in an account of the Custodian
or a Subcustodian containing only assets of the Fund or only assets held by
the Custodian or a Subcustodian as custodian for its customers or are
otherwise held on behalf of others.
(b) SECURITIES REPRESENTED BY BOOK-ENTRY - Securities represented by
book-entry on the books of the issuer, a registrar, a clearing agency or
other agent of the issuer (a "Book-Entry Agent") may be so held in an
account of the Custodian or a Subcustodian or other Agent maintained with
such Book-Entry Agent provided such account contains only assets of the
Fund or only assets held as custodian for customers or are otherwise held
on behalf of others.
(c) OTHER INVESTMENTS - At the specific request of the Fund, the
Custodian may note on its records Investments owned by the Fund that are
not represented by physical securities or by book-entry, including without
limitation Derivative Instruments and Commodities. The Fund acknowledges
that such notation is for recordkeeping purposes only, that the Custodian
may not be able to exercise control over such Investments and that such
Investments may represent contractual rights of the Fund which the
Custodian cannot enforce. The Fund shall be responsible for requesting that
any statements applicable to such Investments, including brokerage
statements, be sent to the Custodian.
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4.2 POWERS AND DUTIES OF THE CUSTODIAN WITH RESPECT TO THE SECURITIES
ACCOUNT - The Custodian shall have the following powers and duties with respect
to the Securities Account:
(a) PURCHASES - Upon receipt of Proper Instructions, insofar as funds
are available or as funds are otherwise provided by the Custodian at its
discretion pursuant to Section 11 hereof for the purpose, to pay for and
receive securities purchased for the account of the Fund, payment being
made (i) upon receipt of the securities by the Custodian, by a clearing
corporation of a securities exchange of which the Custodian or a
Subcustodian is a member, or by a Securities Depository, or (ii) otherwise
in accordance with (A) governmental regulations, (B) rules of Securities
Depositories or other U.S. or foreign clearing agencies, (C) generally
accepted trade practice in the applicable local market, (D) the terms of
the instrument representing the security, or (E) the terms of Proper
Instructions.
(b) SALES - Upon receipt of Proper Instructions, to make delivery of
securities which have been sold for the account of the Fund (i) against
payment therefor in cash, by check or by bank wire transfer; (ii) by
credit to the account of the Custodian or Subcustodian with a clearing
corporation of a securities exchange of which the Custodian or a
Subcustodian is a member; (iii) by credit to the account of the Custodian
or Subcustodian with a Securities Depository; or (iv) otherwise in
accordance with (A) governmental regulations, (B) rules of Securities
Depositories or other U.S. or foreign clearing agencies, (C) generally
accepted trade practice in the applicable local market, (D) the terms of
the instrument representing the security, or (E) the terms of Proper
Instructions.
(c) OTHER TRANSFERS - To deliver Property of the Fund to a
Subcustodian, another custodian or another third party as necessary to
effect transactions authorized by Proper Instructions, and upon receipt of
Proper
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Instructions, to make such other disposition of Property of the Fund in a
manner other than or for purposes other than as enumerated elsewhere in
this Agreement, provided that the instructions relating to such disposition
shall state the amount of Property to be delivered and the name of the
person or persons to whom delivery is to be made.
(d) FUTURES; OPTIONS; SEGREGATED ACCOUNTS - Upon the receipt of
Proper Instructions and the execution of any agreements relating to margin
in respect of a Derivative Instrument or Commodity ("Margin Agreements"),
to establish and maintain on its books a segregated account or accounts for
and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities of the Fund in accordance with the terms
of such Margin Agreements and any Proper Instructions ("Segregated
Accounts").
Upon receipt of Proper Instructions or upon receipt of instructions
given pursuant to any Margin Agreement, or pursuant to the terms of such
Agreement, the Custodian shall (i) receive and retain, to the extent the
same are provided to the Custodian, confirmations or other documents
evidencing the purchase or sale of such Derivative Instruments or
Commodities by the Fund; (ii) deposit and maintain, pursuant to a Margin
Agreement, in a segregated account, either physically or by book-entry in a
Securities Depository, for the benefit of any futures commission merchant
("Margin Account"), or pay pursuant to Proper Instructions to such broker,
dealer or futures commission merchant, such securities, cash or other
assets as are designated by the Fund as initial, maintenance or variation
"margin" deposits or other collateral intended to secure the Fund's
performance of its obligations under the terms of any Derivative Instrument
or Commodity, in accordance with the provisions of any Margin Agreement
relating thereto; and (iii) otherwise pay, release and/or transfer
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securities, cash or other assets into or out of such Margin Accounts only
in accordance with the provisions of any such Margin Agreement. The
Custodian shall not be responsible for the sufficiency of assets held in
any segregated account established in compliance with applicable margin
maintenance requirements or for the performance of the other terms of any
agreement relating to a Derivative Instrument or Commodity.
Notwithstanding anything in this Agreement to the contrary, the Fund
agrees that the Custodian's responsibility for any Derivative Instruments
and Commodities shall be limited to the exercise of reasonable care with
respect to any confirmations or other documents evidencing the purchase or
sale of such Derivative Instrument by the Fund which the Custodian
receives.
(e) STOCK LENDING - Upon receipt of Proper Instructions, to deliver
securities of the Fund, in connection with loans of securities by the Fund,
to the borrower thereof prior to receipt of the collateral, if any, for
such borrowing.
(f) NON-DISCRETIONARY DETAILS - Without the necessity of express
authorization from the Fund, (1) to attend to all nondiscretionary details
in connection with the sale, exchange, substitution, purchase, transfer or
other dealings with securities, cash or other Property of the Fund held by
the Custodian except as otherwise directed from time to time by the
Directors or Trustees of the Fund, and (2) to make payments to itself or
others for minor expenses of handling securities or other similar items
relating to the Custodian's duties under this Agreement, provided that all
such payments shall be accounted for to the Fund.
4.3 CORPORATE ACTIONS - Unless the Custodian receives timely Proper
Instructions to the contrary, the Custodian will perform or will cause the
Subcustodian to perform the following:
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(i) exchange securities held by it for the account of the Fund for
other securities in connection with any reorganization, recapitalization,
split-up of shares, change of par value, conversion or other event relating
to the securities or the issuer of such securities, and shall deposit any
such securities in accordance with the terms of any reorganization or
protective plan;
(ii) surrender securities in temporary form for definitive
securities; surrender securities for transfer into the name of the
Custodian, the Fund or a nominee of either of them, as permitted by Section
4.1(a); and surrender securities for a different number of certificates or
instruments representing the same number of shares or same principal amount
of indebtedness;
(iii) 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, and deposit securities upon
invitations for tenders thereof;
(iv) take all necessary action to comply with the terms of all
mandatory or compulsory exchanges, calls, tenders, redemptions, or similar
rights of security ownership, and promptly notify the Fund of such action,
and collect all stock dividends, rights and other items of like nature;
(v) collect amounts due and payable to the Fund with respect to
portfolio securities of the Fund, and promptly credit to the account of the
Fund all income and other payments relating to portfolio securities and
other assets held by the Custodian hereunder upon Custodian's receipt of
such income or payments or as otherwise agreed in writing by the Custodian
and the Fund, provided that the Custodian shall not be responsible for the
collection of amounts due and payable with respect to portfolio securities
that are in default;
(vi) endorse and deliver any instruments required to effect
collection of any amount due and payable to the Fund with respect to
securities; execute
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ownership and other certificates and affidavits on the Fund's behalf for
all federal, state and foreign tax purposes in connection with receipt of
income, capital gains or other payments with respect to portfolio
securities and other assets of the Fund, or in connection with the
purchase, sale or transfer of such securities or other assets; and file any
certificates or other affidavits for the refund or reclaim of foreign taxes
paid;
(vii) deliver to the Fund all forms of proxies, all notices of
meetings, and any other notices or announcements affecting or relating to
securities owned by the Fund that are received by the Custodian, any
Subcustodian, or any nominee of either of them, and, upon receipt of Proper
Instructions, the Custodian shall execute and deliver, or cause such
Subcustodian or nominee to execute and deliver, such proxies or other
authorizations as may be required. Except as directed pursuant to Proper
Instructions, neither the Custodian nor any Subcustodian or nominee shall
vote upon any such securities, or execute any proxy to vote thereon, or
give any consent or take any other action with respect thereto.
In fulfilling the duties set forth above, the Custodian shall be
responsible for sending to the Fund all information pertaining to the relevant
terms of a corporate action which it in fact receives, provided that the
Custodian shall not be responsible for incorrect information it receives, or
information it has not received but should have received, from industry-accepted
third-party securities information vendors.
Notwithstanding any provision of this Agreement to the contrary, with
respect to portfolio securities registered in so-called street name, the
Custodian shall use reasonable efforts to collect cash or share entitlements due
and payable to the Fund but shall not be responsible for its inability to
collect such cash or share entitlements.
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The Custodian shall only be responsible for acting on the Proper
Instructions of the Fund in respect of any Voluntary Corporate Action provided
the Custodian has received a Proper Instruction requesting such action a
reasonable time prior to expiration of the time within which action in respect
of such Voluntary Corporate Action may be taken, in order to ensure that
Custodian has sufficient time to take such action. The deadline for the
acceptance of such instruction may be set forth by the Custodian in its
communication of the terms of such action to the Fund and shall take into
consideration delays which occur due to (i) the involvement of a Subcustodian,
Securities Depository or other intermediary; (ii) differences in time zones; or
(iii) other factors particular to a given market, exchange or issuer.
Any advance credit of cash or shares by the Custodian or a Subcustodian
expected to be received as a result of any corporate event shall be subject to
actual collection and may, when the Custodian deems such collection unlikely, be
reversed by the Custodian upon written notice to the Fund. As used herein, an
"advance credit of cash or shares" shall mean any credit of cash or shares to
any account maintained hereunder prior to actual receipt and collection of such
cash or shares in anticipation of a distribution expected to be received in the
future.
5. CASH ACCOUNTS.
5.1 OPENING AND MAINTAINING CASH ACCOUNTS - Subject to the terms and
conditions set forth in this Section 5, the Fund hereby authorizes the Custodian
to open and maintain, with itself or with Subcustodians, cash accounts in United
States Dollars and in such other currencies as the Fund shall from time to time
request or as are in the Custodian's discretion required in order for the
Custodian to carry out the terms of this Agreement. The Custodian shall make
payments from or deposits to any of said accounts
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upon its receipt of Proper Instructions from the Fund providing sufficient
details to effect such transaction.
Cash accounts opened on the books of the Custodian ("[ ]
Accounts") shall be opened in the name of the Fund. Subject always to the
provisions of Section 10 hereof, the Custodian shall be liable for repayment
of any and all deposits carried on its books as principal, whether
denominated in United States Dollars or in other currencies.
Cash accounts opened on the books of Subcustodians appointed pursuant to
Section 7 hereof may be opened in the name of the Fund or the Custodian or in
the name of the Custodian for its customers generally ("Agency Accounts").
Such deposits shall be treated as portfolio securities, and accordingly the
Custodian shall be responsible for the exercise of reasonable care in respect
of the administration of such Agency Accounts but shall not be liable for
their repayment in the event the Subcustodian fails to make repayment
(including in the event of the Subcustodian's bankruptcy or insolvency). Both
[ ] Accounts and Agency Accounts shall have the benefit of the
provisions of Section 10 of this Agreement.
The Fund bears all risks of holding or transacting in any currency.
Any credit made to any Agency or [ ] Account shall be provisional and
may be reversed by the Custodian in the event such payment is not actually
collected.
The Custodian shall not be liable for any loss or damage arising from
the applicability of any law or regulation now or hereafter in effect, or
from the occurrence of any event, which may delay or affect the
transferability, convertibility or availability of any currency in the
country (i) in which such [ ] or Agency Accounts are maintained or (ii)
in which such currency is issued, and in no event shall the Custodian be
obligated to make payment of a deposit denominated in a currency during the
period during which its transferability, convertibility or availability has
been affected by any such law, regulation or event. Without limiting the
generality of the foregoing, neither the Custodian nor any
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Subcustodian shall be required to repay any deposit made at a foreign branch of
either the Custodian or Subcustodian if such branch cannot repay the deposit due
to (i) an act of war, insurrection or civil strife; or (ii) an action by a
foreign government or instrumentality, whether de jure or de facto, in the
country in which the branch is located preventing such repayment, unless the
Custodian or such Subcustodian expressly agrees in writing to repay the deposit
under such circumstances.
All currency transactions in any account opened pursuant to this Agreement
are subject to exchange control regulations of the United States and of the
country where such currency is the lawful currency or where the account is
maintained. Any taxes, costs, charges or fees imposed on the convertibility of a
currency held by the Fund shall be for the account of the Fund.
5.2 FOREIGN EXCHANGE TRANSACTIONS - The Custodian shall, pursuant to
Proper Instructions, settle foreign exchange transactions (including contracts,
futures, options and options on futures) on behalf and for the account of the
Fund with such currency brokers or banking institutions, including
Subcustodians, as the Fund may direct pursuant to Proper Instructions. The
Custodian shall be responsible for the transmission of cash and instructions to
and from the currency broker or banking institution with which the contract or
option is made and the safekeeping of all certificates and other documents and
agreements evidencing or relating to such foreign exchange transactions as the
Custodian may receive. In connection with such transactions, the Custodian is
authorized to make free outgoing payments of cash in the form of U. S. Dollars
or foreign currency without receiving confirmation of a foreign exchange
contract or option or confirmation that the countervalue currency completing the
foreign exchange contract has been delivered or received or that the option has
been delivered or received. The Fund accepts full responsibility for its use of
third-party foreign exchange dealers and for execution of said
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foreign exchange contracts and options and understands that the Fund shall be
responsible for any and all costs and interest charges which may be incurred by
the Fund or the Custodian as a result of the failure or delay of third parties
to deliver foreign exchange.
Foreign exchange transactions (including without limitation contracts,
futures, options, and options on futures), other than those executed with the
Custodian as principal, but including those executed with Subcustodians, shall
be deemed to be portfolio securities of the Fund and accordingly the Custodian
shall only be responsible for delivering or receiving currency on behalf of the
Fund in respect of such contracts pursuant to Proper Instructions subject to the
fourth paragraph of this Section 5. The Custodian shall not be responsible for
the failure of any counterparty in such agency transaction to perform its
obligations thereunder.
Alternatively, such transactions may be undertaken by the Custodian as
principal, if instructed by the Fund and accepted by the Custodian, which
instructions may be in the form of a standing instruction.
The obligations of the Custodian in respect of all foreign exchange
transactions shall be contingent on the free, unencumbered transferability of
the currency transacted on the actual settlement date of the transaction.
5.3 DELAYS - In the event a delay is caused by the negligence or willful
misconduct of the Custodian in carrying out a Proper Instruction to transfer
cash in connection with any transaction referred to in Section 5.1 or 5.2 above,
the Custodian shall be liable to the Fund for interest to be calculated at the
rate customarily paid by the Custodian on overnight deposits at the time the
delay occurs for the period from the day when the transfer should have been
effected until the day it is in fact effected. The Custodian shall not be liable
for delays in carrying out such instructions to transfer cash which are not due
to the Custodian's own negligence or willful misconduct.
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6. PROPER INSTRUCTIONS. Proper Instructions shall include, in the following
order of the preferred method of giving such instructions, authenticated
electromechanical communications including direct electronic transmissions,
authenticated SWIFT and tested telex, including Electronic Instructions as
described in Section 8.3,; a written request signed by two or more authorized
persons as set forth below; telefax transmissions; and oral instructions,
including telephone. Proper Instructions may also include such other methods of
communicating Proper Instructions as the parties hereto may from time to time
agree. Each of the first four methods of communicating Proper Instructions is
described and defined below and may from time to time be described and defined
in written operating memoranda between the Custodian and the Fund. The Custodian
is hereby authorized to act on instructions sent via any of the foregoing
methods from any director, employee or officer of the Fund or from the
Investment Adviser or other agent of the Fund as the Fund shall from time to
time instruct.
Authenticated electro-mechanical communications shall include
communications effected directly between electromechanical or electronic devices
or systems, including authenticated SWIFT and tested telex transmissions, and
other forms of communications involving or between such electro-mechanical or
electronic devices or systems as the parties may from time to time agree upon in
writing. In the event media other than tested telex transmissions are agreed
upon, the Custodian may in its discretion require that the Fund, its Investment
Adviser or other agent and the Custodian enter into certain operating memoranda
which shall set forth the media through which such Proper Instructions shall be
transmitted and the data which must be included in such Proper Instructions in
order for such instructions to be complete. Once such operating memoranda shall
have been instituted, the Fund, its Investment Adviser or other Agent shall be
responsible for sending instructions which meet the requirements set forth in
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such operating memoranda and the Custodian shall only be responsible for acting
on instructions which meet such requirements. The Custodian shall not be liable
for damages of any kind, including direct or consequential losses resulting from
technological or equipment failures or communications system failures of any
kind in respect of instructions sent or attempted to be sent via
electromechanical communications.
A written request signed by two or more authorized persons shall include a
written request, direction, instruction or certification signed or initialed on
behalf of the Fund by two or more persons as the Directors or Trustees of the
Fund shall have from time to time authorized, or by such other written procedure
as the Custodian and the Fund shall from time to time agree in writing. Those
persons authorized to give Proper Instructions may be identified by the
Directors or Trustees by name, title or position (including any of its
directors, employees or agents or any investment manager or adviser or person or
entity with similar responsibilities which is authorized to give Proper
Instructions on behalf of the Fund to the Custodian) and will include at least
one officer empowered by the Directors or Trustees to name other individuals or
entities who are authorized to give Proper Instructions on behalf of the Fund.
Telephonic or other oral instructions or instructions given by telefax
transmission may be given by any one of the persons referred to in the preceding
paragraph and will be considered Proper Instructions if the Custodian believes
them to have been given by a person authorized to give such instructions with
respect to the transaction involved.
With respect to telefax transmissions, the Fund and the Custodian hereby
acknowledge that receipt of legible instructions cannot be assured, and that the
Custodian cannot verify that authorized signatures on telefax instructions are
original or properly affixed. Accordingly, the Custodian shall not be
responsible for losses or expenses incurred through actions taken in reliance on
inaccurately stated, illegible or unauthorized telefax instructions.
18
Oral instructions will be confirmed by authenticated electro-mechanical
communications or written instructions in the manner set forth above, but the
lack of such confirmation shall in no way affect any action taken by the
Custodian in reliance upon such oral instructions. The Fund hereby authorizes
the Custodian to tape record any and all telephonic or other oral instructions
given to the Custodian by or on behalf of the Fund (including any of its
Directors, Trustees, employees or agents or any Investment Adviser or person or
entity with similar responsibilities which is authorized to give Proper
Instructions on behalf of the Fund to the Custodian).
Proper Instructions may relate to specific transactions or to types or
classes of transactions, and may be in the form of standing instructions.
The Custodian shall not be responsible for its failure to act on any
instruction received from the Fund which the Custodian in good faith believes
does not meet the requirements set forth herein.
7. AUTHORITY TO APPOINT SUBCUSTODIANS AND AGENTS AND TO UTILIZE SECURITIES
DEPOSITORIES. Subject to the provisions hereinafter set forth in this Section
7, the Fund hereby authorizes the Custodian to utilize Securities Depositories
to act on behalf of the Fund and to appoint from time to time and to utilize
Subcustodians.
The Custodian may deposit and/or maintain Property of the Fund in any non-
U.S. Securities Depository provided such Securities Depository meets the
requirements of an "eligible foreign custodian" under Rule 17f-5 promulgated
under the 1940 Act, or any successor rule or regulation ("Rule 17f-5") or which
by order of the Securities and Exchange Commission is exempted therefrom. The
Custodian may deposit and/or maintain, either directly or through one or more
agents appointed by the Custodian, Property of the Fund in any Securities
Depository in the United States, including The
19
Depository Trust Company, provided such Depository meets applicable requirements
of the Federal Reserve Bank or of the Securities and Exchange Commission.
Notwithstanding anything in this Agreement to the contrary, any Property held in
a Securities Depository, whether or not the Custodian is a direct participant or
member, will be held subject to the rules, regulations, operating memoranda or
other conditions of participation in such Securities Depository.
The Custodian may, at any time and from time to time, appoint any bank as
defined in Section 2(a)(5) of the 1940 Act meeting the requirements of a
custodian under Section 17(f) of the 1940 Act and the rules and regulations
thereunder, to act on behalf of the Fund as a subcustodian for purposes of
holding Property of the Fund in the United States. Additionally, the Custodian
may, at any time and from time to time, appoint (i) any bank, trust company or
other entity meeting the requirements of an "eligible foreign custodian" under
Rule 17f-5 or which by order of the Securities and Exchange Commission is
exempted therefrom, or (ii) any bank as defined in Section 2(a)(5) of the 1940
Act meeting the requirements of a custodian under Section 17(f) of the 1940 Act
and the rules and regulations thereunder, to act on behalf of the Fund as a
subcustodian for purposes of holding Property of the Fund outside the United
States. Any bank, trust company or other entity appointed pursuant to the
foregoing provisions shall be a Subcustodian.
Prior to the appointment of any Subcustodian for purposes of holding
Property of the Fund outside the United States, the Custodian shall have
obtained written confirmation of the approval of the Board of Trustees or
Directors of the Fund with respect to (i) the identity of a Subcustodian, (ii)
the country or countries in which, and the Securities Depositories, if any,
through which, any proposed Subcustodian is authorized to hold Property of the
Fund, and (iii) the subcustodian agreement which shall govern such appointment.
Each such duly approved Subcustodian and the countries where and
20
Securities Depositories through which they may hold Property of the Customer
shall be listed on Appendix A attached hereto as the same may from time to time
be amended. The Custodian may, at any time in its discretion, remove any
Subcustodian that has been appointed as such but will promptly notify the Fund
of any such action.
The Fund shall be responsible for informing the Custodian sufficiently in
advance of a proposed investment which is to be held in a country in which no
Subcustodian is authorized to act in order that the Custodian shall have
sufficient time to establish a subcustodial arrangement in accordance herewith.
In the event, however, the Custodian is unable to establish such arrangements
prior to the time such investment is to be acquired, the Custodian is authorized
to designate at its discretion a local safekeeping agent, and the use of such
local safekeeping agent shall be at the sole risk of the Fund, and accordingly
the Custodian shall be responsible to the Fund for the actions of such agent if
and only to the extent the Custodian shall have recovered from such agent for
any damages caused the Fund by such agent.
With respect to securities and funds held by a Subcustodian, either
directly or indirectly (including by a Securities Depository or clearing
agency), notwithstanding any provisions of this Agreement to the contrary,
payment for securities purchased and delivery of securities sold may be made
prior to receipt of securities or payment, respectively, and securities or
payment may be received in a form, in accordance with (i) governmental
regulations, (ii) rules of Securities Depositories and clearing agencies, (iii)
generally accepted trade practice in the applicable local market, (iv) the terms
of the instrument representing the security, or (v) the terms of Proper
Instructions.
In the event the Custodian receives a claim from a Subcustodian under the
indemnification provisions of any subcustodian agreement, the Custodian shall
promptly give written notice to the Fund of such claim. No more than thirty days
after written notice to the Fund of the Custodian's intention to make such
payment, the Fund will
21
reimburse the Custodian the amount of such payment except in respect of any
negligence or misconduct of the Custodian.
The Custodian may at any time or times in its discretion appoint (and may
at any time remove) any other bank or trust company as its agent (an "Agent") to
carry out such of the provisions of this Agreement as the Custodian may from
time to time direct, provided, however, that the appointment of such Agent shall
not relieve the Custodian of any of its responsibilities under this Agreement.
8. REPORTING; RECORDS. The Custodian shall have and perform the following
duties with respect to recordkeeping.
8.1 RECORDS - The Custodian shall create, maintain and retain such
records relating to its activities and obligations under this Agreement as will
enable the Custodian to comply with its obligations hereunder and as are
customarily maintained by a professional custodian.
8.2 ACCESS TO RECORDS - The books and records maintained by the Custodian
pursuant to this Section 8 shall at reasonable times during the Custodian's
regular business hours be open to inspections and audit by the auditors and by
employees and agents of the Fund provided that all such individuals shall
observe all security requirements of the Custodian applicable to its own
employees having access to similar records and such rules as may be reasonably
imposed by the Custodian.
8.3 ELECTRONIC RECORDS AND COMMUNICATIONS - The Custodian may make any of
its records available to the Fund or its Investment Adviser via electronic
reporting which may include without limitation on-line software systems
("Electronic Reports"). The Fund understands that such Electronic Reports may
include data provided to the Custodian by outside sources which may not have
been independently verified by the
22
Custodian and is subject to change. Accordingly, the Custodian shall not be
liable for inaccuracies, errors or incomplete information furnished by such
sources.
The Custodian may also make available to the Fund or its Investment Adviser
certain software to be used to initiate payment and securities transfer
instructions, affirm brokerage transactions reported through the Institutional
Delivery System or initiate other transaction instructions for the Custodian's
processing ("Electronic Instructions").
The Fund agrees that it shall be responsible for protecting and maintaining
the confidentiality and security of any codes assigned in respect of the Fund's
or its Investment Adviser's access to such Electronic Reports or Electronic
Instructions and that any instructions received through such system using the
client code assigned to the Fund shall be deemed to have originated from or on
behalf of the Fund and to be Proper Instructions.
The Custodian shall not be responsible for information added to, changed or
omitted by electronic programming malfunction, unauthorized access or other
failure of such systems unless such actions are the direct result of the
Custodian's negligence, bad faith or willful malfeasance.
8.4 REVIEW OF RECORDS - The Fund agrees to examine all records howsoever
produced or transmitted promptly upon receipt thereof and to notify the
Custodian promptly of any discrepancy or error therein. Unless the Fund delivers
written notice of any such discrepancy or error to the Custodian within a
reasonable period of time after its receipt thereof, such records shall be
deemed true and accurate.
8.5 APPOINTMENT AS RECORDKEEPING AND NET ASSET VALUE CALCULATION AGENT -
The Custodian is hereby appointed recordkeeping and net asset value calculation
agent responsible for creating, maintaining and retaining such records relating
to its obligations under this Agreement as are required under the 1940 Act
(including Section 31 thereof and Rules 31a-1 and 31a-2 thereunder). All such
records will be the property of the Fund.
23
The Custodian shall compute and determine the net asset value per share of
the Fund as of the close of business on the New York Stock Exchange on each day
on which such Exchange is open, unless otherwise directed by Proper
Instructions. Such computation and determination shall be made in accordance
with (1) the provisions of the Fund's Declaration of Trust or Certificate of
Incorporation and By-Laws, as they may from time to time be amended and
delivered to the Custodian, (2) the votes of the Board of Trustees or Directors
of the Fund at the time in force and applicable, as they may from time to time
be delivered to the Custodian, and (3) Proper Instructions. On each day that
the Custodian shall compute the net asset value per share of the Fund, the
Custodian shall provide the Investment Adviser with written reports which the
Investment Adviser will use to verify that portfolio transactions have been
recorded in accordance with the Fund's instructions and are reconciled with the
Fund's trading records.
In computing the net asset value, the Custodian may rely upon any
information furnished by Proper Instructions, including without limitation any
information (1) as to accrual of liabilities of the Fund and as to liabilities
of the Fund not appearing on the books of account kept by the Custodian, (2) as
to the existence, status and proper treatment of reserves, if any, authorized by
the Fund, (3) as to the sources of quotations
to be used in computing the net asset value, including those listed in Appendix
B, (4) as to the fair value to be assigned to any securities or other property
for which price quotations are not readily available, and (5) as to the sources
of information with respect to "corporate actions" affecting portfolio
securities of the Fund, including those listed in Appendix B. (Information as to
"corporate actions" shall include information as to dividends, distributions,
stock splits, stock dividends, rights offerings, conversions, exchanges,
recapitalizations, mergers, redemptions, calls, maturity dates and similar
transactions, including the ex- and record dates and the amounts or other terms
thereof.) The Fund may instruct the Custodian to utilize a particular source for
the valuation of a
24
specific Security or other Property and the Custodian shall protected in
utilizing the valuation provided by such source without further inquiry in order
to effect calculation of the Fund's net asset value. [Notwithstanding anything
in this Agreement to the contrary, the Custodian shall not be responsible for
the failure of the Fund or the Investment Adviser to provide the Custodian with
Proper Instructions regarding liabilities which ought to be included in the
calculation of the Fund's net asset value.]
In like manner, the Custodian shall compute and determine the net asset
value as of such other times as the Board of Trustees or Directors of the Fund
from time to time may reasonably request.
Notwithstanding any other provisions of this Agreement, including Section
10.1, the following provisions shall apply with respect to the Custodian's
foregoing responsibilities in this Section 8.5: The Custodian shall be held to
the exercise of reasonable care in computing and determining net asset value as
provided in this Section 8.5, but shall not be held accountable or liable for
any losses or damages the Fund or any shareholder or former shareholder of the
Fund or any other person may suffer or incur arising from or based upon errors
or delays in the determination of such net asset value resulting from any event
beyond the reasonable control of the Custodian unless such error or delay was
due to the Custodian's negligence or reckless or willful misconduct in
determination of such net asset value. (The parties hereto acknowledge, however,
that the Custodian's causing an error or delay in the determination of net asset
value may, but does not in and of itself, constitute negligence or reckless or
willful misconduct.) In no event shall the Custodian be liable or responsible to
the Fund, any present or former shareholder of the Fund or any other person for
any error or delay which continued or was undetected after the date of an audit
performed by the certified public accountants employed by the Fund if, in the
exercise of reasonable care in accordance with generally accepted accounting
standards, such accountants should have become aware of such error
25
or delay in the course of performing such audit. The Custodian's liability for
any such negligence or reckless or willful misconduct which results in an error
in determination of such net asset value shall be limited exclusively to the
direct, out-of-pocket loss the Fund, shareholder or former shareholder shall
actually incur, measured by the difference between the actual and the
erroneously computed net asset value, and any expenses the Fund shall incur in
connection with correcting the records of the Fund affected by such error
(including charges made by the Fund's registrar and transfer agent for making
such corrections) or communicating with shareholders or former shareholders of
the Fund affected by such error.
Without limiting the foregoing, the Custodian shall not be held accountable
or liable to the Fund, any shareholder or former shareholder thereof or any
other person for any delays or losses, damages or expenses any of them may
suffer or incur resulting from (1) the Custodian's failure to receive timely and
suitable notification concerning quotations or corporate actions relating to or
affecting portfolio securities of the Fund or (2) any errors in the computation
of the net asset value based upon or arising out of quotations or information as
to corporate actions if received by the Custodian either (i) from a source which
the Custodian was authorized pursuant to the third paragraph of this Section 8.5
to rely upon, (ii) from a source which in the Custodian's reasonable judgment
was as reliable a source for such quotations or information as the sources
authorized pursuant to that third paragraph, [or (iii) relevant information
known to the Fund or the Investment Adviser which would impact the calculation
of net asset value but which is not communicated by the Fund or the Investment
Adviser to the Custodian.]
In the event of any error or delay in the determination of such net asset
value for which the Custodian may be liable, the Fund and the Custodian will
consult and make good faith efforts to reach agreement on what actions should be
taken in order to mitigate any loss suffered by the Fund or its present or
former shareholders, in order that the
26
Custodian's exposure to liability shall be reduced to the extent possible after
taking into account all relevant factors and alternatives. Such actions might
include the Fund or the Custodian taking reasonable steps to collect from any
shareholder or former shareholder who has received any overpayment upon
redemption of shares such overpaid amount or to collect from any shareholder who
has underpaid upon a purchase of shares the amount of such underpayment or to
reduce the number of shares issued to such shareholder. It is understood that
in attempting to reach agreement on the actions to be taken or the amount of the
loss which should appropriately be borne by the Custodian, the Fund and the
Custodian will consider such relevant factors as the amount of the loss
involved, the Fund's desire to avoid loss of shareholder good will, the fact
that other persons or entities could have been reasonably expected to have
detected the error sooner than the time it was actually discovered, the
appropriateness of limiting or eliminating the benefit which shareholders or
former shareholders might have obtained by reason of the error, and the
possibility that other parties providing services to the Fund might be induced
to absorb a portion of the loss incurred.
9. RESPONSIBILITY OF CUSTODIAN. In carrying out the provisions of this
Agreement, the Custodian shall be held to the exercise of reasonable care,
provided that the Custodian shall not thereby be required to take any action
which is in contravention of any law, rule or regulation or any order of any
court of competent jurisdiction. As used in this Agreement, "reasonable care"
shall mean the level of care which a professional custodian providing custody
services to institutional investors would provide in light of the circumstances
and events which reasonably influence its performance in the market where the
securities are held or the transaction is effected, including without limitation
local market practices relating to securities settlement and safekeeping, and
"negligence"
27
shall mean the failure to exercise reasonable care as herein defined. The
Custodian shall, subject to the provisions set forth in Sections 9 and 10
hereof, be responsible to the Fund for any direct loss or damage (without taking
into account special circumstances) which the Fund incurs by reason of the
Custodian's negligence, bad faith or willful malfeasance.
With respect to securities and funds held by a Subcustodian, either
directly or indirectly (including by a Securities Depository or foreign
clearing agency), including demand deposits, currencies or other deposits and
foreign exchange contracts as referred to herein, the Custodian shall be liable
to the Fund if and only to the extent that such Subcustodian is liable to the
Custodian and the Custodian recovers under the applicable subcustodian
agreement.
With respect to the securities, cash and other Property of the Fund held by
a Securities Depository utilized by the Custodian or any Subcustodian or any
agent of the Custodian, the Custodian shall not be liable for the acts and
omissions of such Securities Depository unless and only to the extent that such
Securities Depository is liable to the Custodian and the Custodian recovers from
such Securities Depository, provided always that the Custodian shall be liable
to the Fund only for any direct loss or damage to the Fund resulting from use of
the Securities Depository if caused by the negligence, bad faith or willful
malfeasance of the Custodian.
The Fund agrees to indemnify and hold harmless the Custodian and its
nominees from all claims and liabilities (including counsel fees) incurred or
assessed against it or its nominees in connection with the performance of this
Agreement, except such as may arise from its or its nominees breach of the
relevant standard of conduct set forth herein. Without limiting the foregoing
indemnification obligation of the Fund, the Fund agrees to indemnify the
Custodian and any nominee in whose name portfolio securities or other property
of the Fund is registered against any liability the Custodian or such nominee
may incur by reason of taxes assessed to the Custodian or such nominee or other
costs,
28
liability or expense incurred by the Custodian or such nominee resulting
directly or indirectly from the fact that portfolio securities or other property
of the Fund is registered in the name of the Custodian or such nominee.
10. LIMITATIONS TO CUSTODIAN'S RESPONSIBILITY.
10.1 LIABILITY IN GENERAL - Except as otherwise provided in this
Agreement, the Custodian shall be responsible for loss or damage which the Fund
may incur by reason of the Custodian's negligence, bad faith or willful
malfeasance, PROVIDED ALWAYS that such loss or damage shall be limited to direct
damages incurred by the Fund without taking into account special circumstances,
and PROVIDED FURTHER that the Custodian shall in no event be liable for indirect
or consequential damages or for loss of goodwill, even if the Custodian has been
advised of the likelihood of such loss or damage and regardless of the form of
action.
10.2 LIABILITY OF THE CUSTODIAN WITH RESPECT TO PROPER INSTRUCTIONS;
EVIDENCE OF AUTHORITY; ETC. - The Custodian shall not be liable for, and shall
be indemnified by the Fund for losses or damages incurred or assessed against
the Custodian as a result of, any action taken or omitted in reliance upon
Proper Instructions or upon any other written notice, request, direction,
instruction, certificate or other instrument believed by it to be genuine.
The Custodian shall be entitled, at the expense of the Fund, to receive and
act upon advice of (a) its own counsel or counsel which it selects, (b) counsel
for the Fund, or (c) such other counsel as the Fund and the Custodian may agree
upon, with respect to all matters. The Custodian shall be without liability for
any action taken or omitted pursuant to such advice.
29
10.3 TITLE TO SECURITIES, FRAUDULENT SECURITIES - 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.
10.4 FORCE MAJEURE - Notwithstanding any other provision contained herein,
the Custodian shall not be liable for any action taken, or for any failure to
take any action required to be taken hereunder, or otherwise for its failure to
fulfill its obligations hereunder (including without limitation the failure to
receive or deliver securities or the failure to receive or make any payment) in
the event and to the extent that the taking of such action or such failure
arises out of or is caused by civil commotion, act of God, accident, fire, water
damage, explosion, mechanical breakdown, computer or system failure or other
equipment failure, malfunction or failure caused by computer virus, failure or
malfunctioning of any communications medium for whatever reason, interruption
(whether partial or total) of power supplies or other utility service, strike or
other stoppage (whether partial or total) of labor, market conditions which
prevent the orderly execution of securities transactions or affect the value of
Property, any law, decree, regulation or order of any government or governmental
body, de facto or de jure (including any court or tribunal), rules or
regulations of any Securities Depository or clearing agency or any other cause
whatsoever (whether similar or dissimilar to the foregoing) beyond its control
or the control of its Subcustodian or other agent (collectively, "Force
Majeure").
10.5 SOVEREIGN RISK - Without limiting the generality of the foregoing
Section 10.4, the Custodian shall not be liable for any losses resulting from a
Sovereign Risk. As used herein, a Sovereign Risk shall mean any act of war,
terrorism, riot, insurrection or civil commotion; the imposition of exchange
control restrictions; confiscation, expropriation or nationalization of any
property including without limitation cash, cash
30
equivalents, securities or the assets of any issuer of securities by any
governmental or quasi-governmental authority (including without limitation
those authorities which are judicial, legislative, executive, military or
religious in nature), whether de facto or de jure; currency devaluation or
revaluation; the imposition of taxes, levies or other charges affecting the
Fund's property, or any other political risk (whether similar or dissimilar
to the foregoing) incurred in respect of the country in which the issuer of
such securities is organized or in which such securities are held or such
payments are held or effected.
10.6 CURRENCY RISKS - The Fund bears all risks of holding or
transacting in any currency. Without limiting the generality of the
foregoing, the Fund bears all risks that rules or procedures imposed by
Securities Depositories, exchange controls, asset freezes or other laws or
regulations shall prohibit or impose burdens on or costs relating to the
transfer by or for the account of the Fund of securities, cash or currency
held outside the United States or denominated in a currency other than U. S.
dollars or on the conversion of any currency so held. The Custodian shall in
no event be obligated to substitute another currency (including U.S. dollars)
for a currency whose transferability, convertibility or availability has been
affected by any such law, regulation, rule or procedure.
10.7 INVESTMENT RISKS NOT ASSUMED BY CUSTODIAN - The Custodian shall
have no liability in respect of any loss or damage suffered by the Fund,
insofar as such loss or damage arises from commercial or other investment
risks inherent in investing in capital markets or in holding securities in a
particular jurisdiction or country including without limitation: (i)
political, legal, economic, settlement and custody infrastructure, exchange
rate and currency risks; (ii) investment and repatriation restrictions; (iii)
the Fund's or Custodian's inability to protect and enforce any local legal
rights including rights of title and beneficial ownership; (iv) corruption
and crime in the local market; (v) unreliable information which emanates from
the local market; (vi) volatility of banking and
31
financial systems and infrastructure; (vii) bankruptcy and insolvency risks
of any and all local banking agents, counterparties to cash and securities
transactions or registrars or transfer agents; (viii) risk of issuer
insolvency or default; and (ix) market conditions which prevent the orderly
execution of transactions or the value of assets.
10.8 INVESTMENT LIMITATIONS - In performing its duties generally, and
more particularly in connection with the purchase, sale and exchange of
securities made by or for the Fund, the Custodian may assume unless and until
notified in writing to the contrary that Proper Instructions received by it
are not in conflict with or in any way contrary to any provisions of the
Fund's Declaration of Trust or Certificate of Incorporation or By-Laws (or
comparable documents) or votes or proceedings of the shareholders or Trustees
or Directors of the Fund. The Custodian shall in no event be liable to the
Fund and shall be indemnified by the Fund for any violation which occurs in
the course of carrying out instructions given by the Fund or any Investment
Adviser of any investment limitations to which the Fund is subject or other
limitations with respect to the Fund's powers to make expenditures, encumber
securities, borrow or take similar actions affecting the Fund.
10.9 FOREIGN OWNERSHIP LIMITATIONS - The Fund shall be responsible for
monitoring foreign ownership limitations in any markets in which it invests.
10.10 RESTRICTED SECURITIES - The Custodian shall only be
responsible for notifying the Fund of any restrictions on the transfer of
securities held in the Securities Account of which the Custodian is in fact
aware. In no event shall the Custodian be responsible for the inability of a
Fund to sell or transfer restricted securities or for delays incurred in the
sale or transfer of restricted securities if such inability or delay is the
result of the terms of the security itself, actions of the issuer, its
counsel or other representative (including without limitation its registrar),
or limitations due to laws, regulations or other applicable rules. The
Custodian shall only be responsible for transmitting information to
32
the Fund as to those corporate actions in respect of restricted securities
which it in fact receives.
10.11 MARKET INFORMATION - The Custodian may in its discretion make
market information available to the Fund. This service is for informational
purposes only and is not to be construed as a recommendation to buy or sell a
particular security, to invest or not to invest in a particular country, or
to take any action whatsoever. Although information reported therein is
believed to be accurate, the Custodian does not represent or warrant its
accuracy or completeness. The Fund accordingly acknowledges that the
Custodian provides market information on a best efforts basis and recognizes
its responsibility to consult with its own independent sources before making
any investment or other decisions.
11. ADVANCES AND SECURITY FOR ADVANCES. In the event that the Custodian is
directed by Proper Instructions to make any payment or transfer of funds from
any [ ] or Agency Account on behalf of the Fund for which there would
be, at the close of business on the date of such payment or transfer, whether
known at that time or subsequently determined, insufficient funds held by the
Custodian or any Subcustodian, Securities Depository, or otherwise on behalf
of the Fund, or if the Custodian or any nominee thereof shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Agreement (collectively a
"Liability"), the Custodian may, in its discretion without further Proper
Instructions, provide or authorize an advance ("Advance") for the account of
the Fund in an amount sufficient to satisfy such Liability or to allow the
settlement or completion of the transaction by reason of which such payment
or transfer of funds is to be made. Any Advance shall be payable on demand
made by the Custodian, unless otherwise agreed by
33
the Fund and the Custodian, and shall accrue interest from the date of the
Advance to the date of payment by the Fund at a rate agreed upon from time to
time by the Custodian and the Fund or otherwise at the rate the Custodian
customarily charges on loans to customers. It is understood that any
transaction in respect of which the Custodian shall have made an Advance,
including but not limited to a foreign exchange contract or transaction in
respect of which the Custodian is not acting as a principal, is for the
account of and at the risk of the Fund, and not, by reason of such Advance,
deemed to be a transaction undertaken by the Custodian for its own account
and risk. If the Custodian shall make or authorize any Advance to the Fund
or incur any Liability, then in such event any property at any time held for
the account of the Fund by the Custodian, a Subcustodian, a Securities
Depository or otherwise ("Collateral") shall be security for such Liability
or for such Advance and the interest thereon, and if the Fund shall fail to
pay such Advance or interest when due or shall fail to reimburse or indemnify
the Custodian promptly in respect of a Liability, the Custodian shall be
entitled to utilize available cash and to dispose of the Fund's property,
including securities and balances in any [ ] or Agency Account, to the
extent necessary (which shall include the right to sell or assign securities
or otherwise assign its security interest to third parties) to obtain
repayment, reimbursement or indemnification.
For purposes of this Section 11, all such Collateral shall be treated as
financial assets credited to securities accounts under revised Articles 8 and
9 of the Uniform Commercial Code (1994), whether such Articles have in fact
been adopted in the jurisdiction in which the securities are held or the
Advance is granted. Accordingly, with respect to any Collateral, the
Custodian shall have the rights and benefits of a secured creditor that is a
securities intermediary for the Fund under the Uniform Commercial Code as
revised.
34
Deposits maintained in Agency Accounts and [ ] Accounts (including
all accounts denominated in any currency) shall collectively constitute a
single and indivisible current account with respect to the Fund's obligations
to the Custodian or any Subcustodian hereunder. Accordingly, balances in all
such Agency and [ ] Accounts shall at all times be available for
satisfaction of the Fund's obligations under this Agreement to the Custodian
or any of its Subcustodians or agents including without limitation any
Advances incurred pursuant to this Section.
12. COMPENSATION. The Fund shall pay the Custodian a custody fee based on
such fee schedule as may from time to time be agreed upon in writing by the
Custodian and the Fund. Such fee, together with all out-of-pocket expenses
for which the Custodian is to be reimbursed, shall be billed to the Fund and
be paid by cash or wire transfer to the Custodian.
13. TERMINATION. This Agreement shall continue in full force and effect
until 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 ninety (90) days after the date of such delivery or mailing.
In the event of termination the Custodian shall be entitled to receive, prior
to delivery of the securities, cash and other Property held by it, payment of
all accrued fees and unreimbursed expenses and all Advances and Liabilities,
upon receipt by the Fund of a statement setting forth such fees, expenses,
Advances and Liabilities.
In the event of the appointment of a successor custodian, it is agreed
that the cash, securities and other Property owned by the Fund and held by
the Custodian or
35
any Subcustodian shall be delivered to the successor custodian, and the
Custodian agrees to cooperate with the Fund in execution of documents and
performance of other actions necessary or desirable in order to substitute the
successor custodian for the Custodian under this Agreement.
14. MISCELLANEOUS. The following miscellaneous provisions shall govern the
relationship between the parties --
14.1. EXECUTION OF DOCUMENTS, ETC. Upon request, the Fund shall execute
and deliver to the Custodian such proxies, powers of attorney or other
instruments as may be reasonable and necessary or desirable in connection with
the performance by the Custodian or any Subcustodian of their respective
obligations to the Fund under this Agreement or any applicable subcustodian
agreement with respect to the Fund.
14.2. ENTIRE AGREEMENT - This Agreement constitutes the entire
understanding and agreement of the Fund, on the one hand, and the Custodian, on
the other, with respect to the subject matter hereof and accordingly, supersedes
as of the effective date of this Agreement any custodian agreement or other oral
or written agreements heretofore in effect between the Fund and the Custodian
with respect to custody of the Fund's Property.
14.3. WAIVERS AND AMENDMENTS - No provision of this Agreement may be
waived, amended or terminated except by a statement in writing signed by the
party against which enforcement of such waiver, amendment or termination is
sought; PROVIDED HOWEVER any appendix or addendum to this Agreement may be added
or amended from time to time by the Fund's execution and delivery to the
Custodian of such additional or amended appendix or addendum, in which case the
terms thereof shall take effect immediately upon execution by the Custodian or
otherwise as set forth in this Agreement.
36
14.4. INTERPRETATION - In connection with the operation of this Agreement,
the Custodian and the Fund may agree in writing from time to time on such
provisions interpretative of or in addition to the provisions of this Agreement
with respect to the Fund as may be consistent with the general tenor of this
Agreement. No interpretative or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this Agreement.
14.5. CAPTIONS - Headings contained in this Agreement, which are included
as convenient references only, shall have no bearing upon the interpretation of
the terms of the Agreement or the obligations of the parties hereto.
14.6. GOVERNING LAW - The provisions of this Agreement shall be construed
in accordance with and governed by the laws of the State of [ ] without
giving effect to principles of conflicts of law. The parties hereto irrevocably
consent to the exclusive jurisdiction of the courts of the State of [ ] and
the federal courts located in [ ].
14.7 NOTICES - Except in the case of Proper Instructions, notices and
other writings contemplated by this Agreement shall be delivered by hand or by
facsimile transmission (provided that in the case of delivery by facsimile
transmission, such notice or other writing shall also be mailed postage prepaid)
to the parties at the following addresses:
(a) If to the Fund:
(b) If to the Custodian:
[ ]
37
or to such other address as the Fund or the Custodian may have designated in
writing to the other.
14.8. ASSIGNMENT - This Agreement shall be binding on and shall inure to
the benefit of the Fund and the Custodian and their respective successors and
assigns, provided that neither the Custodian nor the Fund may assign this
Agreement or any of its rights or obligations hereunder without the prior
written consent of the other party.
14.9. COUNTERPARTS - This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement shall
become effective when one or more counterparts have been signed and delivered by
the Fund and the Custodian.
14.10. CONFIDENTIALITY; SURVIVAL OF OBLIGATIONS - The parties hereto
agree that each shall treat confidentially the terms and conditions of this
Agreement and all information provided by each party to the other regarding
its business and operations. All confidential information provided by a
party hereto shall be used by any other party hereto solely for the purpose
of rendering or obtaining services pursuant to this Agreement and, except as
may be required in carrying out this Agreement, shall not be disclosed to any
third party without the prior consent of such providing party. The foregoing
shall not be applicable to any information that is publicly available when
provided or thereafter becomes publicly available other than through a breach
of this Agreement, or that is required to be disclosed by or to any bank
examiner of the Custodian or any Subcustodian, any regulatory authority, any
auditor of the parties hereto, or by judicial or administrative process or
otherwise by applicable law or regulation. The provisions of this Agreement
and any other rights or obligations incurred or accrued by any party hereto
prior to termination of this Agreement shall survive any termination of this
Agreement.
38
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in its name and behalf on the day and year first above written.
[ ] [ ]
By ____________________________ By ____________________________
Name: Name:
Title: Title:
39
AMENDMENT TO THE CUSTODIAN AGREEMENT
AMENDMENT entered into as of this _____ day of ____________, 1997 to the
Custodian Agreement between _________________________(the "Fund") and [ ]
(the "Custodian") dated as of ____________________(the "Agreement").
In consideration of the Custodian's offering subcustodial services to the
Fund in Russia, the Fund and the Custodian agree that the Agreement is hereby
amended as follows:
1. Section 4. SECURITIES ACCOUNT is amended by the addition of the
following phrase at the end of said Section:
"provided, however, that the Custodian's responsibility for safekeeping
equity securities of Russian issuers ("Russian Equities") hereunder shall
be limited to the safekeeping of relevant share extracts from the share
registration books maintained by the entities providing share registration
services to issuers of Russian Equities (each a "Registrar") indicating an
investor's ownership of such securities (each a "Share Extract")."
2. Section 4.1 (b) SECURITIES REPRESENTED BY BOOK-ENTRY, is amended by
the addition of the following at the end of said Section:
"However, with respect to Russian Equities, the Custodian shall instruct a
Subcustodian to endeavor to assure that registration thereof shall be
reflected on the books of the issuer's Registrar, subject to the following
conditions, but shall in no event be liable for losses or costs incurred as
a result of delays or failures in the registration process, including
without limitation the inability to obtain or enforce relevant Share
Extracts. Such registration may be in the name of a nominee of a
Subcustodian. In the event registration is in the name of a Fund, such Fund
hereby acknowledges that only the Custodian or Subcustodian may give
instructions to the Registrar to transfer or engage in other transactions
involving the Russian Equities so registered.
1
A Subcustodian may from time to time enter into contracts with Registrars
with respect to the registration of Russian Equities ("Registrar Contracts").
Such Registrar Contracts may provide for (i) regular share confirmations by the
Subcustodian, (ii) reregistrations within set timeframes, (iii) use of a
Subcustodian's nominee name, (iv) direct access by auditors of the Subcustodian
or its clients to share registers, and (v) specification of the Registrar's
responsibilities and liabilities. It is hereby acknowledged and agreed that the
Custodian does not represent or warrant that such Registrar Contracts are
enforceable.
If the Fund instructs the Custodian to settle a purchase of a Russian
Equity, the Custodian will instruct a Subcustodian to endeavor on a best efforts
basis to reregister the Russian Equity and obtain a Share Extract in a timely
manner.
After completion of reregistration of a Russian Equity in respect of which
a Subcustodian has entered into a Registrar Contract, the Custodian shall
instruct the Subcustodian to monitor such registrar on a best efforts basis and
to notify the Custodian upon the Subcustodian's obtaining knowledge of the
occurrence of any of the following events ("Registrar Events"): (i) a Registrar
has eliminated a shareholder from the register or has altered registration
records; (ii) a Registrar has refused to register securities in the name of a
particular purchaser and the purchaser or seller has alleged that the
registrar's refusal to so register was unlawful; (iii) a Registrar holds for its
own account shares of an issuer for which it serves as registrar; (iv) if a
Registrar Contract is in effect with a Registrar, the Registrar notifies the
Subcustodian that it will no longer be able materially to comply with the terms
of the Registrar Contract; or (v) if a Registrar Contract is in effect with a
Registrar, the Registrar has materially breached such Contract. The Custodian
shall inform the Funds of the occurrence of a Registrar Event provided the
Custodian has in fact received actual notice thereof from the Subcustodian.
It shall be the sole responsibility of the Fund to contact the Custodian
prior to executing any transaction in a Russian Equity to determine whether a
Registrar Contract exists in respect of such issuer.
If the Fund instructs the Custodian by Proper Instruction to settle a
purchase of a Russian Equity in respect of which the Subcustodian has not
entered into a Registrar Contract, then the Custodian shall instruct the
Subcustodian to endeavor to settle such transaction in accordance with the
Proper Instruction and with the provisions of Section 4.2 (a) of this Agreement,
notwithstanding the absence of any such Registrar Contract and without the
Custodian being required to notify the Fund that no such Registrar Contract is
then in effect, and it being understood that neither the Custodian nor the
Subcustodian shall be required to follow the procedure set forth in the second
preceding paragraph."
3. Section 4.2 (a) PURCHASES, is amended by the addition of the
following at the end of said Section:
"Without limiting the generality of the foregoing, the following
provisions shall apply with respect to settlement of purchases of
securities in Russia. Unless otherwise
2
instructed by Proper Instructions acceptable to the Custodian, the
Custodian shall only authorize a Subcustodian to make payment for purchases
of Russian Equities upon receipt of the relevant Share Extract in respect
of the Fund's purchases. With respect to securities other than Russian
Equities, settlement of purchases shall be made in accordance with
securities processing or settlement practices which the Custodian in its
discretion determines to be a market practice. The Custodian shall only be
responsible for securities purchased upon actual receipt of such securities
at the premises of its Subcustodian, provided that the Custodian's
responsibility for securities represented by Share Extracts shall be
limited to the safekeeping of the relevant Share Extract upon actual
receipt of such Share Extract at the premises of the Subcustodian."
4. SECTION 4.2 (B) SALES- is amended by the addition of the following at
the end of said Section:
"Without limiting the generality of the foregoing, the following
provisions shall apply with respect to settlement of sales of securities in
Russia. Unless otherwise expressly instructed by Proper Instructions
acceptable to the Custodian, settlement of sales of securities shall be
made in accordance with securities processing or settlement practices which
the Custodian in its discretion determines to be a market practice. The
Fund hereby expressly acknowledges that such market practice might require
delivery of securities prior to receipt of payment and that the Fund bears
the risk of payment in instances where delivery of securities is made prior
to receipt of payment therefor in accordance with Proper Instructions
received by the Custodian or pursuant to the Custodian's determination in
its discretion that such delivery is in accordance with market practice.
The Custodian shall not be responsible for any securities delivered from
the premises of the Subcustodian from the time they leave such premises."
5. SECTION 7 AUTHORITY TO APPOINT SUBCUSTODIANS AND AGENTS AND TO UTILIZE
SECURITIES DEPOSITORIES is amended by the addition of the following at the end
of the first paragraph of Section 7:
"With respect to Russia, the Fund hereby expressly acknowledges that a
Subcustodian for Russian securities may from time to time delegate any of
its duties and responsibilities to any securities depository, clearing
agency, share registration agent or sub-subcustodian (collectively,
"Russian Agent") in Russia, including without limitation Rosvneshtorgbank
(also called Vneshtorgbank RF) ("VTB"). The Fund acknowledges that the
rights of the Subcustodian against any such Russian Agent may consist only
of a contractual claim against the Russian Agent. Notwithstanding any
provision of this
3
Agreement to the contrary, neither the Custodian nor the Subcustodian shall
be responsible or liable to the Fund or its shareholders for the acts or
omissions of any such Russian Agent. In the event of a loss of securities
or cash held on behalf of the Fund through any Russian Agent, the Custodian
shall not be responsible to the Fund or its shareholders unless and to the
extent it in fact recovers from the Subcustodian."
6. SECTION 10.2 LIABILITY OF THE CUSTODIAN WITH RESPECT TO PROPER
INSTRUCTIONS; EVIDENCE OF AUTHORITY; ETC. is amended by the insertion of the
following at the end of the first paragraph of said Section:
"It is also agreed that the Fund shall be responsible for preparation
and filing of tax returns, reports and other documents on any activities
it undertakes in Russia which are to be filed with any relevant
governmental or other authority and for the payment of any taxes, levies,
duties or similar liability the Fund incurs in respect of property held or
sold in Russia or of payments or distributions received in respect thereof
in Russia. Accordingly, the Fund hereby agrees to indemnify and hold
harmless the Custodian from any loss, cost or expense resulting from the
imposition or assessment of any such tax, duty, levy or liability or any
expenses related thereto."
7. A new SECTION 15, RISK DISCLOSURE ACKNOWLEDGMENT, is added at the end
of the present Section 14.10:
"The Fund hereby acknowledges that it has received, has read and has
understood the Custodian's Risk Disclosure Statement, a copy of which is
attached hereto and is incorporated herein by reference. The Fund further
acknowledges that the Risk Disclosure Statement is not comprehensive, and
warrants and represents to the Custodian that it has undertaken its own
review of the risks associated with investment in Russia and has concluded
that such investment is appropriate for the Fund and in no way conflicts
with the Fund's constitutive documents, investment objective, duties to its
shareholders or with any regulatory requirements applicable to the Fund."
4
Except as amended above, all the provisions of the Agreement as heretofore
in effect shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first set forth above.
[ ]
__________________________________ ___________________________________
Name: Name:
Title: Title:
5
RISK DISCLOSURE STATEMENT
In connection with your consideration of investment in Russia, we bring
to your attention the following risks which, although they exist in many
markets around the world, we believe deserve special consideration in Russia.
This list is not comprehensive and is intended only to highlight some of the
risks inherent in investing in Russia which appear to be greater than those
in other established markets. These risks include, without limitation:
POLITICAL AND ECONOMIC RISKS
There is no history of stability in this market and no guarantee of future
stability. The emerging nature of the Russian political system in its
current democratic form leaves it more vulnerable to break down in the event
of economic instability or popular unrest. The dynamic nature of the
political environment can make the future uncertain. The economic
infrastructure is poor, and the country maintains a high level of external
and internal debt. Tax regulations are ambiguous and unclear, and there is a
risk of imposition of arbitrary or onerous taxes due to the lack of a fair
and economically rational tax regime.
COMMERCIAL AND CREDIT RISKS
Banks and other financial systems are not well developed or regulated, and as
a result tend to be untested and have low credit ratings. Organized crime
and corruption are a feature of the business environment, and bankruptcy and
insolvency are commonplace as businesses are learning how to cope in new
conditions. In terms of cash, securities and other investment transactions,
the risk of broker, counterparty and other third party default is high. The
same holds true for issuers, where the risk of default is high. Insurance is
expensive and difficult to obtain in light of the volatility of the
commercial environment.
LIQUIDITY RISKS
Foreign investment is affected by restrictions in terms of repatriation and
convertibility of the currency. The xxxxx is only convertible internally,
and the value of investments may be affected by fluctuations in available
currency rates and exchange control regulations. The repatriation of
profits may be restricted in some cases. Due to the undeveloped nature of
the banking system, considerable delays can occur in transferring funds,
converting rubles into other currencies and remitting funds out of Russia.
LEGAL AND REGULATORY RISKS
Russia's legal system is evolving and is not as developed as that of a western
country. It is based on a civil code with no system of judicial precedents.
The regulatory environment is sometimes uncertain since the total law can
encompass the civil code, legislative laws, presidential decrees, and ministry
resolutions. The code, laws, decrees, and resolutions ("Regulations") are
promulgated at separate times and are not necessarily consistent. The issuance
of Regulations does not always keep pace with market developments, thereby
creating ambiguities and inconsistencies.
Regulations governing securities investment may not exist or may be interpreted
and applied in an arbitrary or inconsistent manner. There may be a risk of
conflict between the rules and
-6-
regulations of the local, regional, and national governments. The concept of
share ownership rights and controls may not be in place or be enforceable.
The independence of the courts from economic, political, or national
influence is basically untested and the courts and judges are not experienced
in business and corporate law. Foreign investors cannot be guaranteed
redress in a court of law for a breach of local laws, regulations or
contracts.
The securities market regulatory body, the Federal Commission on the Capital
Market, was established in 1994 and is responsible for overseeing market
participants, including registrars. However, the monitoring of and
enforcement of the obligations of registrar companies is difficult due to
geographic dispersion and inconsistent interpretation and application of
regulations.
OPERATIONAL RISKS
SHAREHOLDER TITLE TO SECURITIES: Shareholder risk is a major risk for equity
investment in Russia. For example, shares are dematerialized and the only
legal evidence of ownership is the shareholder's name entered in the register
of the company. The concept of fiduciary duty on the part of companies'
management is generally non-existent. Therefore, shareholders may suffer a
dilution or loss of investment, due to arbitrary changes in the shareholder
register, with little or no recourse or redress available. Local laws and
regulations may not prohibit or restrict a company's management from
materially changing the company's structure without the consent of
shareholders. Legislation prohibiting xxxxxxx xxxxxxx activities is
rudimentary.
CLEARING AND SETTLEMENT: Settlements in Russia are non-DVP. For equity
settlements, the payments are usually handled offshore in USD after the
shares are reregistered on the books of the company or its registrar.
However, the only evidence of the registration is a company "extract" which
is a photocopy of the appropriate page from the register reflecting the new
shareholder's name. The extract does not have a legal basis for establishing
ownership in the event of a loss.
For Ministry of Finance (MinFin) bond settlements, payments are made offshore
in USD upon settlement of the bearer bonds at Vneshtorgbank's (VTB) office in
Moscow. If the bonds are transported between the local subcustodian and VTB,
the investor is exposed to transportation risk as the MinFins are bearer
bonds and are not replaceable in the event they are lost, stolen, or
destroyed.
Foreign investors can also invest in treasury issues through the Moscow
Interbank Currency Exchange (MICEX). These issues settle book-entry at MICEX
in rubles only.
TRANSPARENCY: The rules regulating corporate governance may not exist or are
underdeveloped and offer little protection to minority shareholders.
Disclosure and reporting requirements are not to the expected level of most
developed western nations. The accounting standards generally used in Russia
are not international standards and in many cases may be a cash based,
nonaccrual method of accounting. The quality, reliability, and availability
of information on companies in Russia is lower than in most western markets.
-7-
Because of these and other risks inherent in Russia, the custody
services available in Russia are not of the same standard as those available
in developed markets. As with all markets, [ ] must consider and accept
these risks when it decides to invest in the market. As you know, the risks
associated with investing in emerging markets deserve special attention as
they are considerably higher than those in more developed markets. This Risk
Disclosure Statement should not be the sole source of information for risk
with respect to the Russian market. We suggest that you review the market
independently and consult with your own legal advisors.
March, 1997
Acknowledged:
_____________________________________
Name:
Title:
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