CUSTODIAN AGREEMENT
THIS AGREEMENT, dated as of this 25th day of July, 2005, between
THE WORLD FUNDS, INC., an open-end management investment company incorporated in Maryland and registered with the Commission under the 1940 Act (the Fund), on behalf of each of the series listed on the attached Appendix C as the same may from time to time be updated (each a Series), and XXXXX BROTHERS XXXXXXXX & CO., a limited partnership formed under the laws of the State of New York (BBH&Co. or the Custodian),
WHEREAS, the Fund wishes to employ BBH&Co. to act as custodian for the Fund and to provide related services, all as provided herein, and BBH&Co. is willing to accept such employment, subject to the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the Fund and BBH&Co. hereby agree, as follows:
1. Appointment of Custodian. The Fund hereby appoints BBH&Co. as the Fund’s custodian, and BBH&Co. hereby accepts such appointment. All Investments of the Fund delivered to the Custodian or its agents or Subcustodians shall be dealt with as provided in this Agreement. The duties of the Custodian with respect to the Fund’s Investments shall be only as set forth expressly in this Agreement which duties are generally comprised of safekeeping and various administrative duties that will be performed in accordance with Instructions and as reasonably required to effect Instructions.
2. Representations, Warranties and Covenants of the Fund. The Fund hereby represents, warrants
and covenants each of the following:
2.1 This Agreement has been, and at the time of delivery of each Instruction such
Instruction will have been, duly authorized, executed and delivered by the Fund.
This Agreement does not violate any Applicable Law or conflict with or constitute
a default under the Fund’s prospectus or other organic document, agreement,
judgment, order or decree to which the Fund is a party or by which it or its Investments
is bound. |
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2.2 By providing an Instruction with respect to the first acquisition of an Investment
in a jurisdiction other than the United States of America, the Fund shall be deemed
to have confirmed to the Custodian that the Fund has (a) assessed and accepted all
material Country or Sovereign Risks and accepted responsibility for their occurrence,
(b) made all determinations required to be made by the Fund under the 1940 Act,
and (iii) appropriately and adequately disclosed to its shareholders, other investors
and all persons who have rights in or to such Investments, all material investment
risks, including those relating to the custody and settlement infrastructure or
the servicing of securities in such jurisdictions. |
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2.3 The Fund shall safeguard and shall solely be responsible for the safekeeping
of any testkeys, identification codes, passwords, other security devices or statements
of account with which the Custodian provides it. In furtherance and not limitation
of the foregoing, in the event the Fund utilizes any on-line service offered by
the Custodian, the Fund and the Custodian shall be fully responsible for the security
of its respective connecting terminal, access thereto and the proper and authorized
use thereof and the initiation and application of continuing effective safeguards
in respect thereof. |
3. Representation and Warranty of BBH&Co. BBH&Co. hereby represents and warrants that this Agreement has been duly authorized, executed and delivered by BBH&Co. and does not and will not violate any Applicable Law or conflict with or constitute a default under BBH&Co.’s limited partnership agreement or any agreement, instrument, judgment, order or decree to which BBH&Co. is a party or by which it is bound.
4. Instructions. Unless otherwise explicitly indicated herein, the Custodian shall perform its duties pursuant to Instructions. As used herein, the term Instruction shall mean a directive initiated by the Fund, acting directly or through its board of directors, officers or other Authorized Persons, which directive shall conform to the requirements of this Section 4.
4.1 Authorized Persons. For purposes hereof, an Authorized Person shall be a person or entity
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authorized to give Instructions for or on behalf of the Fund by written notices to the Custodian or otherwise in accordance with procedures delivered to and acknowledged by the Custodian, including without limitation the Fund’s Investment Adviser or Foreign Custody Manager. The Custodian may treat any Authorized Person as having full authority of the Fund to issue Instructions hereunder unless the notice of authorization contains explicit limitations as to said authority. The Custodian shall be entitled to rely upon the authority of Authorized Persons until it receives appropria te written notice from the Fund to the contrary.
4.2 Form of Instruction. Each Instruction shall be transmitted by such secured or authenticated electro-mechanical means as the Custodian shall make available to the Fund from time to time unless the Fund shall elect to transmit such Instruction in accordance with Subsections 4.2.1 through 4.2.3 of this Section.
4.2.l Fund Designated Secured-Transmission Method. Instructions may be transmitted
from time to time through a secured or tested electro-mechanical means which has
been previously approved by the parties; it being understood that such acknowledgment
shall authorize the Custodian to receive and process Instructions received by such
means of delivery but shall not represent a judgment by the Custodian as to the
reasonableness or security of the method determined by the Authorized Person. |
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4.2.2 Written Instructions. Instructions may be transmitted in a writing that
bears the manual signature of Authorized Persons. |
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4.2.3 Other Forms of Instruction. Instructions may also be transmitted by
another means determined by the Fund or Authorized Persons and acknowledged and
accepted by the Custodian (subject to the same limits as to acknowledgements as
is contained in Subsection 4.2.1, above) including Instructions given orally or
by SWIFT, telex or telefax (whether tested or untested). |
When an Instruction is given by means established under Subsections 4.2.l through 4.2.3, it shall be the responsibility of the Custodian to use reasonable care to adhere to any security or other procedures established in writing between the Custodian and the Authorized Person with respect to such means of
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Instruction, but such Authorized Person shall be solely responsible for determining that the particular means chosen is reasonable under the circumstances. Oral Instructions shall be binding upon the Custodian only if and when the Custodian takes action with respect thereto. With respect to telefax instructions, the parties agree and acknowledge that receipt of legible instructions cannot be assured, that the Custodian cannot verify that authorized signatures on telefax instructions are original or properly affixed, and that the Custodian shall not be liable for losses or expenses incurred through actions taken in reliance on inaccurately stated, illegible or unauthorized telefax instructions. The provisions of Section 4A of the Uniform Commercial Code shall apply to funds transfers performed in accordance with Instructions. In the event that a Funds Transfer Services Agreement is executed between the Fund or an Authorized Person and the Custodian, such an agreement shall comprise a designation of form of a means of delivering Instructions for purposes of this Section 4.2.
4.3 Completeness and Contents of Instructions. The Authorized Person shall be responsible for assuring the adequacy and accuracy of Instructions. Particularly, upon any acquisition or disposition or other dealing in the Fund’s Investments and upon any delivery and transfer of any Investment or moneys, the person initiating such Instruction shall give the Custodian an Instruction with appropriate detail, including, without limitation:
4.3.1 The
transaction date and the date and location of settlement; |
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4.3.2 The
specification of the type of transaction; |
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4.3.3 A description of the Investments or moneys in question, including, as appropriate,
quantity, price per unit, amount of money to be received or delivered and currency
information. Where an Instruction is communicated by electronic means, or otherwise
where an Instruction contains an identifying number such as a CUSIP, SEDOL or ISIN
number, the Custodian shall be entitled to rely on such number as controlling notwithstanding
any inconsistency contained in such Instruction, particularly with respect to Investment
description; |
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4.3.4 The name of the broker or similar entity concerned with execution of the |
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Ifthe Custodian shall determine that an Instruction is either unclear or incomplete, the Custodian may give prompt notice of such determination to the Fund, and the Fund shall thereupon amend or otherwise reform such Instruction. In such event, the Custodian shall have no obligation to take any action in response to the Instruction initially delivered until the redelivery of an amended or reformed Instruction.
4.4 Timeliness of Instructions. In giving an Instruction, the Fund shall take into consideration delays which may occur due to the involvement of a Subcustodian or agent, differences in time zones, and other factors particular to a given market, exchange or issuer. When the Custodian has established specific timing requirements or deadlines with respect to particular classes of Instruction, or when an Instruction is received by the Custodian at such a time that it could not reasonably be expected to have acted on such instruction due to time zone differences or other factors beyond its reasonable control, the execution of any Instruction received by the Custodian after such deadline or at such time (including any modification or revocation of a previous Instruction) shall be at the risk of the Fund.
5. Safekeeping of Fund Assets. The Custodian shall hold Investments delivered to it or Subcustodians for the Fund in accordance with the provisions of this Section. The Custodian shall not be responsible for (a) the safekeeping oflnvestments not delivered or that are not caused to be issued to it or its Subcustodians; or, (b) pre-existing faults or defects in Investments that are delivered to the Custodian, or its Subcustodians. The Custodian is hereby authorized to hold with itself or a Subcustodian, and to record in one or more accounts, all Investments delivered to and accepted by the Custodian, any Subcustodian or
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their respective agents pursuant to an Instruction or in consequence of any corporate action. The Custodian shall hold Investments for the account of the Fund and shall segregate Investments from assets belonging to the Custodian and shall cause its Subcustodians to segregate Investments from assets belonging to the Subcustodian in an account held for the Fund or in an account maintained by the Subcustodian generally for non-proprietary assets of the Custodian.
5.1 Use of Securities Depositories. The Custodian may deposit and maintain Investments in any Securities Depository approved on Appendix A, either directly or through one or more Subcustodians appointed by the Custodian. Investments held in a Securities Depository shall be held (a) 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, as the case may be, and (b) in an account for the Fund or in bulk segregation in an account maintained for the non-proprietary assets of the entity holding such Investments in the Depository. If market practice or the rules and regulations of the Securities Depository prevent the Custodian, the Subcustodian or (any agent of either) from holding its client assets in such a separate account, the Custodian, the Subcustodian or other agent shall as appropriate segregate such Investments for benefit of the Fund or for benefit of clients of the Custodian generally on its own books.
5.2 Certificated Assets. Investments which are certificated may be held in registered or bearer form: (a) in the Custodian’s vault; (b) in the vault of a Subcustodian or agent of the Custodian or a Subcustodian; or (c) in an account maintained by the Custodian, Subcustodian or agent at a Securities Depository; all in accordance with customary market practice in the jurisdiction in which any Investments are held.
5.3 Registered Assets. Investments which are registered may be registered in the name of the
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Custodian, a Subcustodian, or in the name of the Fund or a nominee for any of the foregoing, and may be held in any manner set forth in paragraph 5.2 above with or without any identification of fiduciary capacity in such registration.
5.4 Book Entry Assets. Investments which are represented by book-entry may be so held in an account maintained by the Book-Entry Agent on behalf of the Custodian, a Subcustodian or another agent of the Custodian, or a Securities Depository.
5.5 Replacement of Lost Investments. In the event of a loss of Investments for which the Custodian is responsible under the terms of this Agreement, the Custodian shall replace such Investment, or in the event that such replacement cannot be effected, the Custodian shall pay to the Fund the fair market value of such Investment based on the last available price as of the close of business in the relevant market on the date that a claim was first made to the Custodian with respect to such loss, or, if less, such other amount as shall be agreed by the parti es as the date for settlement.
6. Administrative Duties of the Custodian. The Custodian shall perform the following administrative duties with respect to Investments of the Fund.
6.1 Purchase of Investments. Pursuant to Instruction, Investments purchased
for the account of the Fund shall be paid for (a) against delivery thereof to the
Custodian or a Subcustodian, as the case may be, either directly or through a Clearing
Corporation or a Securities Depository (in accordance with the rules of such Securities
Depository or such Clearing Corporation), or (b) otherwise in accordance with an
Instruction, Applicable Law, generally accepted trade practices, or the terms of
the instrument representing such Investment. |
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6.2 Sale of Investments. Pursuant to Instruction, Investments sold for the
account of the Fund shall be delivered (a) against payment therefor in cash, by
check or by bank wire transfer , (b) by credit to |
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the account of the Custodian or the applicable Subcustodian, as the case may be, with a Clearing Corporation or a Securities Depository (in accordance with the rules of such Securities Depository or such Clearing Corporation), or (c) otherwise in accordance with an Instruction, Applicable Law, generally accepted trade practices, or the terms of the instrument representing such Investment.
6.3 Delivery in Connection with Borrowings of the Fund or other Collateral and Margin Requirements. Pursuant to Instruction, the Custodian may deliver Investments or cash of the Fund in connection with borrowings and other collateral and margin requirements, provided that the Fund shall give no instructions that would result in the Fund, or an affiliate of the Fund known to the custodian, obtaining custody of Fund assets. The Fund shall be responsible for (i) notifying its investment advisor or any party authorized to give instructions on behalf of the Fund that deliveries to an affiliate of the Fund are prohibited, and (ii) notifying any such party as to entities which may be considered affiliates of the Fund.
6.4 Futures and Options. If,pursuant to an Instruction, the Custodian shall become a party to an agreement with the Fund and a futures conunission merchant regarding margin (Tri-Party Agreement), the Custodian shall (a) receive and retain, to the extent the same are provided to the Custodian, confirmations or other documents evidencing the purchase or sale by the Fund of exchange-traded futures contracts and commodity options, (b) when required by such Tri-Party Agreement, deposit and maintain in an account opened pursuant to such Agreement (Margin Account), segregated either physically or by book-entry in a Securities Depository for the benefit of any futures conunission merchant, such Investments as the Fund shall have designated 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 exchange-traded futures contracts and commodity options; and (c) thereafter pay, release or transfer Investments into or out of the margin account in accordance with the provisions of the such Agreement. Alternatively, the Custodian may deliver Investments, in accordance with an Instruction, to a futures conunission merchant for purposes of margin requirements in accordance with Rule l7f-6 under the 1940 Act. The Custodian shall in no event be responsible for the acts and omissions of any futures commission merchant to whom Investments are delivered pursuant to this Section; for the sufficiency of Investments held in any Margin Account; or, for the performance of any terms of any exchange-traded futures contracts and commodity options.
6.5 Contractual Obligations and Similar Investments. From time to time, the Fund’s
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Investments may include Investments that are not ownership interests as may be represented by certificate (whether registered or bearer), by entry in a Securities Depository or by book entry agent, registrar or similar agent for recording ownership interests in the relevant Investment. If the Fund shall at any time acquire such Investments, including without limitation deposit obligations, loan participations, repurchase agreements and derivative arrangements, the Custodian shall (a) receive and retain, to the extent the same are provided to the Custodian, confirmations or other documents evidencing the arrangement; and (b) perform on the Fund’s account in accordance with the terms of the applicable arrangement, but only to the extent directed to do so by Instruction. The Custodian shall have no responsibility for agreements running to the Fund as to which it is not a party other than to retain, to the extent the same are provided to the Custodian, documents or copies of documents evidencing the arrangement and, in accordance with Instruction. to include such arrangements in reports made to the Fund.
6.6 Exchange of Securities. Unless otherwise directed by Instruction, the Custodian shall: (a) exchange securities held for the account of the Fund for other securities in connection with any reorganization, recapitalization, conversion, split-up, change of par value of shares or similar event, and (b) deposit any such securities in accordance with the terms of any reorganization or protective plan.
6.7 Surrender of Securities. Unless otherwise directed by Instruction, the Custodian may surrender securities: (a) in temporary form for definitive securities; (b) for transfer into the name of an entity allowable under Section 5.3; and (c) for a different number of certificates or instruments representing the same number of shares or the same principal amount of indebtedness.
6.8 Rights, Warrants, Etc. Pursuant to Instruction, the Custodian shall (a) deliver warrants, puts, calls, rights or similar securities to the issuer or trustee thereof, or to any agent of such issuer or trustee, for purposes of exercising such rights or selling such securities, and (b) deposit securities in response to any invitation for the tender thereof.
6.9 Mandatory Corporate Actions. Unless otherwise directed by Instruction, the Custodian shall: (a) comply with the terms of all mandatory or compulsory exchanges, calls, tenders, redemptions or similar rights of securities ownership affecting securities held on the Fund’s account and promptly notify the Fund of such action, and (b) collect all stock dividends, rights and other items of like nature with respect to such securities.
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6.10 Income Collection. Unless otherwise directed by Instruction, the Custodian shall collect any amount due and payable to the Fund with respect to Investments and promptly credit the amount collected to a Principal or Agency Account; provided, however, that the Custodian shall not be responsible for: (a) the collection of amounts due and payable with respect to Investments that are in default, or (b) the collection of cash or share entitlements with respect to Investments that are not registered in the name of the Custodian or its Subcustodians. The Custodian is hereby authorized to endorse and deliver any instrument required to be so endorsed and delivered to effect collection of any amount due and payable to the Fund with respect to Investments.
6.11 Ownership Certificates and Disclosure of the Fund’s Interest. The Custodian is hereby authorized to execute on behalf of the Fund ownership certificates, affidavits or other disclosure required under Applicable Law or established market practice in connection with the receipt of income, capital gains or other payments by the Fund with respect to Investments, or in connection with the sale, purchase or ownership oflnvestments.
6.12 Proxy Materials. The Custodian shall deliver, or cause to be delivered, to the Fund proxy forms, notices of meeting, and any other notices or announcements materially affecting or relating to Investments received by the Custodian or any nominee.
6.13. Taxes. The Custodian shall, where applicable, assist the Fund in the reclamation of taxes withheld on dividends and interest payments received by the Fund. In the performance of its duties with respect to tax withholding and reclamation, the Custodian shall be entitled to rely on the advice of counsel and upon information and advice regarding the Fund’s tax status that is received from or on behalf of the Fund without duty of separate inquiry.
6.14 Other Dealings. The Custodian shall otherwise act as directed by Instruction, including without limitation effecting the free payments of moneys or the free delivery of securities, provided that such Instruction shall indicate the purpose of such payment or delivery and that the Custodian shall record the party to whom such payment or delivery is made.
The Custodian shall attend to all nondiscretionary details in connection with the sale or purchase
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or other administration of Investments, except as otherwise directed by an Instruction, and may makepayments to itself or others for minor expenses of administering Investments under this Agreement; provided that the Fund shall have the right to request an accounting with respect to such expenses.
In fulfilling the duties set forth in Sections 6.6 through 6.10 above, the Custodian shall provide to the Fund all material information pertaining to a corporate action which the Custodian actually receives; provided that the Custodian shall not be responsible for the completeness or accuracy of such information. Information relative to any pending corporate action made available to the Fund via any of the services described in the Electronic and Online Services Schedule shall constitute delivery of such information by the Custodian. Any advance credit of cash or shares expected to be received as a result of any corporate action shall be subject to actual collection and may, when the Custodian deems collection unlikely, be reversed by the Custodian.
The Custodian may at any time or times in its discretion appoint (and may at any time remove) agents (other than Subcustodians) to carry out some or all of the administrative provisions of this Agreement (Agents), provided, however, that the appointment of such agent shall not relieve the Custodian of its administrative obligations under this Agreement.
7. Cash Accounts, Deposits and Money Movements. Subject to the terms and conditions set forth in this Section 7, the Fund hereby authorizes the Custodian to open and maintain, with itself or with Subcustodians, cash accounts in United States Dollars, in such other currencies as are the currencies of the countries in which the Fund maintains Investments or in such other currencies as the Fund shall from time to time request by Instruction.
7.1 Types of Cash Accounts. Cash accounts opened on the books of the Custodian (Principal
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Accounts) shall be opened in the name of the Fund. Such accounts collectively shall be a deposit obligation of the Custodian and shall be subject to the terms of this Section 7 and the general liability provisions contained in Section 9. Cash accounts opened on the books ofa Subcustodian 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 obligations of the Subcustodian and shall be treated as an Investment of the Fund. Accordingly, the Custodian shall be responsible for exercising reasonable care in the administration of such accounts but shall not be liable for their repayment in the event such Subcustodian, by reason of its bankruptcy, insolvency or otherwise, fails to make repayment.
7.2 Payments and Credits with Respect to the Cash Accounts. The Custodian shall make payments from or deposits to any of said accounts in the course of carrying out its administrative duties, including but not limited to income collection with respect to the Fund’s Investments, and otherwise in accordance with Instructions. The Custodian and its Subcustodians shall be required to credit amounts to the cash accounts only when moneys are actually received in cleared funds in accordance with banking practice in the country and currency of deposit. Any credit made to any Principal or Agency Account before actual receipt of cleared funds shall be provisional and may be reversed by the Custodian in the event such payment is not actually collected. Unless otherwise specifically agreed in writing by the Custodian or any Subcustodian, all deposits shall be payable only at the branch of the Custodian or Subcustodian where the deposit is made or carried.
7.3 Currency and Related Risks. The Fund bears risks of holding or transacting in any currency. 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
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transferability, convertibility or availability of any currency in the country (a) in which such Principal or Agency Accounts are maintained or (b) 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 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 a cause for which the Custodian would not be responsible in accordance with the terms of Section 9 of this Agreement 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.
7.4 Foreign Exchange Transactions. The Custodian shall, subject to the terms of this Section, 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 Instructions. The Custodian may act as principal in any foreign exchange transaction with the Fund in accordance with Section 7.4.2 of this Agreement. The obligations of the Custodian in respect of all foreign exchange transactions (whether or not the Custodian shall act as principal in such transaction) shall be contingent on the free, unencumbered transferability of the currency transacted on the actual settlement date of the transaction.
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7.4. l Third Party Foreign Exchange Transactions. The Custodian shall process
foreign exchange transactions (including without limitation contracts, futures,
options, and options on futures), where any third party acts as principal counterparty
to the Fund on the same basis it performs duties as agent for the Fund with respect
to any other of the Fund’s Investments. Accordingly the Custodian shall only
be responsible for delivering or receiving currency on behalf of the Fund in respect
of such contracts pursuant to Instructions. The Custodian shall not be responsible
for the failure of any counterparty (including any Subcustodian) in such agency
transaction to perform its obligations thereunder. The Custodian (a) shall transmit
cash and Instructions to and from the currency broker or banking institution with
which a foreign exchange contract or option has been executed pursuant hereto, (b)
may make free outgoing payments of cash in the form of United States 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, and (c) shall hold all confirmations, certificates and other documents
and agreements received by the Custodian and evidencing or relating to such foreign
exchange transactions in safekeeping. The Fund accepts full responsibility for its
use of third-party foreign exchange dealers and for execution of said 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. |
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7.4.2
Foreign Exchange with the Custodian as Principal. The Custodian may undertake
foreign exchange transactions with the Fund as principal as the Custodian and the
Fund may agree from time to time. In such event, the foreign exchange transaction
will be performed in accordance with the particular agreement of the parties, or
in the event a principal foreign exchange transaction is initiated by Instruction
in the absence of specific agreement, such transaction will be performed in accordance
with the usual commercial terms of the Custodian. |
7.5 Delays. Ifno event of Force Majeure shall have occurred and be continuing and in the event that a delay shall have been caused by the negligence or willful misconduct of the Custodian in carrying out an Instruction to credit or transfer cash, the Custodian shall be liable to the Fund: (a) with respect to Principal Accounts, for interest to be calculated at the rate customarily paid on such deposit and currency 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; and, (b) with respect to Agency Accounts, for interest to be calculated at the rate customarily paid on such deposit and currency by the Subcustodian on overnight deposits at the time the delay occurs for the period from the day when the
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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.
7.6 Advances. If, for any reason in the conduct of its safekeeping duties pursuant to Section 5 hereof or its administration of the Fund’s assets pursuant to Section 6 hereof, the Custodian or any Subcustodian advances monies to facilitate settlement or otherwise for benefit of the Fund (whether or not any Principal or Agency Account shall be overdrawn either during, or at the end of, any Business Day), the Fund hereby does:
7.6.1 acknowledge that the Fund shall have no right or title to any Investments purchased with such Advance save a right to receive such Investments upon: (a) the debit of the Principal or Agency Account; or, (b) if such debit would produce an overdraft in such account, other reimbursement of the associated Advance; | ||
7.6.2 grant to the Custodian a security interest in all Investments; and, | ||
7.6.3 agree that the Custodian may secure the resulting Advance by perfecting a security interest in all Investments under Applicable Law. With respect to obligations and liabilities which occur to each series under the Fund, such obligations and liabilities shall apply only to the respective series and not to any other series under the Fund. |
Neither the Custodian nor any Subcustodian shall be obligated to advance monies to the Fund, and in the event that such Advance occurs, any transaction giving rise to an Advance shall be for the account and risk of the Fund and shall not be deemed to be a transaction undertaken by the Custodian for its own account and risk. If such Advance shall have been made by a Subcustodian or any other person, the Custodian may assign the security interest and any other rights granted to the Custodian hereunder to such Subcustodian or other person. If the Fund shall fail to repay when due the principal balance of an Advance and accrued and unpaid interest thereon, the Custodian or its assignee, as the case may be, shall be entitled to utilize the available cash balance in any Agency or Principal Account and to dispose of any Investments to the extent
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necessary to recover payment of all principal of, and interest on, such Advance in full. The Custodian may assign any rights it has hereunder to a Subcustodian or third party. Any security interest in Investments taken hereunder shall be treated as financial assets credited to securities accounts under Articles 8 and 9 of the Uniform Commercial Code as currently in effect in New York. Accordingly, the Custodian shall have the rights and benefits of a secured creditor that is a securities intermediary under such Articles 8 and 9.
7.7 Integrated Account. For purposes hereof, deposits maintained in all Principal Accounts (whether or not denominated in United States Dollars) shall collectively constitute a single and indivisible current account with respect to the Fund’s obligations to the Custodian, or its assignee, and balances in such Principal Accounts shall be available for satisfaction of the Fund’s obligations under this Section 7. The Custodian shall further have a right of offset against the balances in any Agency Account maintained hereunder to the extent that the aggregate of all Principal Accounts is overdrawn. With respect to obligations and liabilities which occur to each series under the Fund, such obligations and liabilities shall apply only to the respective series and not to any other series under the Fund .
8. Subcustodians and Securities Depositories. Subject to the provisions hereinafter set forth in this Section 8, 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. With respect to securities and funds held by a Subcustodian, either directly or indirectly (including by a Securities Depository or Clearing Corporation), 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 (a) governmental regulations, (b) rules of Securities Depositories and clearing agencies, (c) generally accepted trade practice
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in the applicable local market, (d) the tenns and characteristics of the particular Investment, or (e) the terms of Instructions.
8.1 Domestic Subcustodians and Securities Depositories. The Custodian may deposit and/or maintain, either directly or through one or more agents appointed by the Custodian, Investments of the Fund in any Securities Depository in the United States, including The Depository Trust Company, provided such Depository meets applicable requirements of the Federal Reserve Bank or of the Securities and Exchange Commission. 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 l7(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 Investments of the Fund in the United States.
8.2 Foreign Subcustodians and Securities Depositories. The Custodian may deposit and/or maintain non-U.S. Investments of the Fund in any non-U.S. Securities Depository provided such Securities Depository meets the requirements of an “eligible securities depository” under Rule l7f-7 promulgated under the 1940 Act, or any successor rule or regulation (“Rule 17f-7”) or which by order of the Securities and Exchange Commission is exempted therefrom. Prior to the time that securities are placed with such depository, but subject to the provisions of Section 8.2.4 below, the Custodian shall have prepared an analysis of the custody risks associated with maintaining assets with the Securities Depository and shall have established a system to monitor such risks on a continuing basis in accordance with subsection 8.2.3 of this Section. Additionally, the Custodian may, at any time and from time to time, appoint (a) 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
17
therefrom, or (b) 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 Investments of the Fund outside the United States. Such appointment of foreign Subcustodians shall be subject to approval of the Fund in accordance with Subsections 8.2.1 and 8.2.2 hereof, and use of non-U.S.Securities Depositories shall be subject to the terms of Subsections 8.2.3 and 8.2.4 hereof. An Instruction to open an account in a given country shall comprise authorization of the Custodian to hold assets in such country in accordance with the terms of this Agreement. The Custodian shall not be required to make independent inquiry as to the authorization of the Fund to invest in such country.
8.2.1. Board Approval of Foreign Subcustodians. Unless and except to the extent
that the Board has delegated to, and the Custodian has accepted delegation of, review
of certain matters concerning the appointment of Subcustodians pursuant to Subsection
8.2.2, the Custodian shall, prior to the appointment of any Subcustodian for purposes
of holding Investments of the Fund outside the United States, obtain written confirmation
of the approval of the Board of Trustees or Directors of the Fund with respect to
(a) the identity of a Subcustodian, and (b) the Subcustodian agreement which shall
govern such appointment, such approval to be signed by an Authorized Person. |
||
8.2.2. Delegation of Board Review of Subcustodians. From time to time, the
Custodian may agree to perform certain reviews of Subcustodians and of Subcustodian
Contracts as delegate of the Fund’s Board. In such event, the Custodian’s
duties and obligations with respect to this delegated review will be performed in
accordance with the terms of the attached l7f-5 Delegation Schedule to this Agreement. |
||
8.2.3. Monitoring and Risk Assessment of Securities Depositories. Prior to
the placement of any assets of the Fund with a Securities Depository, the Custodian:
(a) shall provide to the Fund or its authorized representative an assessment of
the custody risks associated with maintaining assets within such Securities Depository;
and (b) shall have established a system to monitor the custody risks associated
with maintaining assets with such Securities Depository on a continuing basis and
to promptly notify the Fund or its Investment Adviser of any material changes in
such risk. In performing its duties under this subsection, the Custodian shall use
reasonable care and may rely on such reasonable sources of information as may be
available including but not limited to: (i) published ratings; (ii) information
supplied by a Subcustodian that is a participant in such Securities Depository;
(iii) industry surveys or publications; (iv) information supplied by the depository
itself, by its auditors (internal or external) or by the relevant Foreign Financial
Regulatory Authority. It is acknowledged that information procured through some
or all of these sources may not be independently verifiable by the Custodian and
that direct access to Securities Depositories is limited under most circumstances. |
18
Accordingly, the Custodian shall not be responsible for errors or omissions in its duties hereunder provided that it has performed its monitoring and assessment duties with reasonable care. The risk assessment shall be provided to the Fund or its Investment Advisor by such means as the Custodian shall reasonably establish. Advice of material change in such assessment may be provided by the Custodian in the manner established as customary between the Fund and the Custodian for transmission of material market information. |
8.3 Responsibility for Subcustodians. Except as set forth in the following sentence, the Custodian shall be liable to the Fund for any loss or damage to the Fund caused by or resulting from the acts or omissions of any Subcustodian to the extent that such acts or omissions would be deemed to be negligence, gross negligence or willful misconduct in accordance with the terms of the relevant subcustodian agreement under the laws, circumstances and practices prevailing in the place where the act or omission occurred. In the countries indicated in Appendix A-1 to this Agreement, the liability of the Custodian shall be subject to the additional condition that the Custodian actually recovers such loss or damage from the Subcustodian and shall be limited to the amount of such recovery.
8.4 New Countries. 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, if it deems appropriate to do so, 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.
19
9. Responsibility of the Custodian. In performing its duties and obligations
hereunder, the Custodian shall use reasonable care under the facts and circumstances
prevailing in the market where perfonnance is effected. Subject to the specific
provisions of this Section, the Custodian shall be liable for any direct damage
incurred by the Fund in consequence of the Custodian’s negligence, bad faith
or willful misconduct. In no event shall the Custodian be liable hereunder for any
special, indirect, punitive or consequential damages arising out of, pursuant to
or in connection with this Agreement even if the Custodian has been advised of the
possibility of such damages. It is agreed that the Custodian shall have no duty
to assess the risks inherent in the Fund’s Investments or to provide investment
advice with respect to such Investments and that the Fund as principal shall bear
any risks attendant to particular Investments such as failure of counterparty or
issuer. |
|
9.1 Limitations of Performance. The Custodian shall not be responsible under this Agreement for any failure to perform its duties, and shall not liable hereunder for any loss or damage in association with such failure to perform, for or in consequence of the following causes: | |
9.1.1 Force Majeure. Force Majeure shall mean any circumstance or event which is beyond
the reasonable control of the Custodian, a Subcustodian or any agent of the Custodian
or a Subcustodian and which adversely affects the perfonnance by the Custodian of
its obligations hereunder, by the Subcustodian of its obligations under its Subcustody
Agreement or by any other agent of the Custodian or the Subcustodian, including
any event caused by, arising out of or involving (a) an act of God, (b) accident,
fire, water damage or explosion, (c) any computer, system or other equipment failure
or malfunction caused by any computer virus or the malfunction or failure of any
communications medium, provided that the Custodian shall take reasonable actions
to prevent the occurrence of failures or malfunctions within its reasonable control,
(d) any interruption of the power supply or other utility service, (e) any strike
or other work stoppage, whether partial or total, (t) any delay or disruption resulting
from or reflecting the occurrence of any Sovereign Risk, (g) any disruption of,
or suspension of trading in, the securities, commodities or foreign exchange markets,
whether or not resulting from or reflecting the occurrence of any Sovereign Risk,
(h) any encumbrance on the transferability of a currency or a currency position
on the actual settlement date of a foreign exchange transaction, whether or not
resulting from or reflecting the occurrence of any Sovereign Risk, or (i) any other
cause similarly beyond the reasonable control of the Custodian. |
|
9.1.2 Country
Risk. Country Risk shall mean, with respect to the acquisition, |
20
ownership,
settlement or custody of Investments in a jurisdiction, all risks relating to, or
arising in consequence of, systemic and market factors affecting the acquisition,
payment for or ownership of Investments including (a) the prevalence of crime and
corruption, (b) the inaccuracy or unreliability of business and financial information,
(c) the instability or volatility of banking and financial systems, or the absence
or inadequacy of an infrastructure to support such systems, (d) custody and settlement
infrastructure of the market in which such Investments are transacted and held,
(e) the acts, omissions and operation of any Securities Depository, (f) the risk
of the bankruptcy or insolvency of banking agents, counterparties to cash and securities
transactions, registrars or transfer agents, and (g) the existence of market conditions
which prevent the orderly execution or settlement of transactions or which affect
the value of assets. |
|
9.1.3 Sovereign
Risk. Sovereign Risk shall mean, in respect of any jurisdiction, including the
United States of America, where Investments is acquired or held hereunder or under
a Subcustody Agreement, (a) any act of war, terrorism, riot, insurrection or civil
commotion, (b) the imposition of any investment, repatriation or exchange control
restrictions by any Governmental Authority, (c) the confiscation, expropriation
or nationalization of any Investments by any Governmental Authority, whether de
facto or de jure, (iv) any devaluation or revaluation of the currency, (d) the imposition
of taxes, levies or other charges affecting Investments, (vi) any change in the
Applicable Law, or (e) any other economic or political risk incurred or experienced. |
|
9.2. Limitations on Liability. The Custodian shall not be liable for any loss, claim, damage or other liability arising from the following causes: | |
9.2.1 Failure
of Third Parties. The failure of any third party including: (a) any issuer of
Investments or book-entry or other agent of any issuer; (b) any counterparty with
respect to any Investment, including any issuer of exchange-traded or other futures,
option, derivative or commodities contract; (c) failure of an Investment Advisor,
Foreign Custody Manager or other agent of the Fund; or (d) failure of other third
parties similarly beyond the control or choice of the Custodian. |
|
9.2.2 Information
Sources. The Custodian may rely upon information received from issuers of Investments
or agents of such issuers, information received from Subcustodians and from other
commercially reasonable sources such as commercial data bases and the like, but
shall not be responsible for specific inaccuracies in such information, provided
that the Custodian has relied upon such information in good faith, or for the failure
of any commercially reasonable information provider. |
|
9.2.3 Reliance
on Instruction. Action by the Custodian or the Subcustodian in accordance with
an Instruction, even when such action conflicts with, or is contrary to any provision
of, the Fund’s declaration of trust, certificate of incorporation or by-laws,
Applicable Law, or actions by the trustees, directors or shareholders of the Fund. |
|
9.2.4 Restricted
Securities. The limitations inherent in the rights, transferability or similar
investment characteristics of a given Investment of the Fund. |
|
10. Indemnification. The Fund hereby indemnifies the Custodian and each Subcustodian, and their |
21
respective
agents, nominees and their partners, employees, officers and directors, and agrees
to hold each of them harmless from and against all claims and liabilities, including
counsel fees and taxes, incurred or assessed against any of them in connection with
the performance of this Agreement and any Instruction. If a Subcustodian or any
other person indemnified under the preceding sentence, gives written notice of claim
to the Custodian, the Custodian shall promptly give written notice to the Fund.
Not more than thirty days following the date of such notice, unless the Custodian
shall be liable under Section 8 hereof in respect of such claim, the Fund will pay
the amount of such claim or reimburse the Custodian for any payment made by the
Custodian in respect thereof. The custodian shall consult with the Fund prior to
making payments under this section. |
|
11. Reports and Records. The Custodian shall: | |
11.1 create
and maintain records relating to the performance of its obligations under this Agreement; |
|
11.2 make
available to the Fund, its auditors, agents and employees, during regular business
hours of the Custodian, upon reasonable request and during normal business hours
of the Custodian, all records maintained by the Custodian pursuant to paragraph
(a) above, subject, however, to all reasonable security requirements of the Custodian
then applicable to the records of its custody customers generally; and |
|
11.3 make
available to the Fund all electronic reports; it being understood that the Custodian
shall not be liable hereunder for the inaccuracy or incompleteness thereof or for
errors in any information included therein. |
|
The Fund
shall examine all records, howsoever produced or transmitted, promptly upon receipt
thereof and notify the Custodian promptly of any discrepancy or error therein. Unless
the Fund delivers written notice of any such discrepancy or error within a reasonable
time after its receipt thereof, such records shall be deemed to be true and accurate.
It is understood that the Custodian now obtains and will |
22
in the future
obtain information on the value of assets from outside sources which may be utilized
in certain reports made available to the Fund. The Custodian deems such sources
to be reliable but it is acknowledged and agreed that the Custodian does not verify
nor represent nor warrant as to the accuracy or completeness of such information
and accordingly shall be without liability in selecting and using such sources and
furnishing such information. |
12. !tfiscellaneou |
12.1 Proxies,
etc. The Fund will promptly execute and deliver, upon request, such proxies,
powers of attorney or other instruments as may be necessary or desirable for the
Custodian to provide, or to cause any Subcustodian to provide, custody services. |
12.2 Entire
Agreement. Except as specifically provided herein, this Agreement constitutes
the entire agreement between the Fund and the Custodian with respect to the subject
matter hereof. Accordingly, this Agreement supersedes any custody agreement or other
oral or written agreements heretofore in effect between the Fund and the Custodian
with respect to the custody of the Fund’s Investments. |
12.3 Waiver
and Amendment. No provision of this Agreement may be waived, amended or modified,
and no addendum to this Agreement shall be or become effective, or be waived, amended
or modified, except by an instrument in writing executed by the party against which
enforcement of such waiver, amendment or modification is sought; provided, however,
that an Instruction shall, whether or not such Instruction shall constitute a waiver,
amendment or modification for purposes hereof, shall be deemed to have been accepted
by the Custodian when it commences actions pursuant thereto or in |
23
accordance therewith. |
12.4 GOVERNING
LAW AND JURISDICTION. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH,
AND BE GOVERNED BY THE LAWS OF, THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
THE LAWS OF CONFLICT OF SUCH STATE. THE PARTIES HERETO IRREVOCABLY CONSENT TO THE
EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE FEDERAL COURTS
LOCATED IN NEW YORK CITY IN THE BOROUGH OF MANHATTAN. |
12.5 Notices.
Notices and other writings contemplated by this Agreement, other than Instructions,
shall be delivered (a) by hand , (b) by first class registered or certified mail,
postage prepaid, return receipt requested, (c) by a nationally recognized overnight
courier or (d) by facsimile transmission, provided that any notice or other writing
sent by facsimile transmission shall also be mailed, postage prepaid, to the party
to whom such notice is addressed. All such notices shall be addressed, as follows: |
If to the
Fund: |
Xxxx Xxxxx
III |
Commonwealth
Shareholder Services, Inc. |
0000 Xxxxx
Xxxxx Xxxxxxx Xxxxx 000 |
Xxxxxxxx,
XX 00000 |
Telephone:
0-000-000-0000 |
If to the
Custodian: |
Xxxxx Brothers
Xxxxxxxx & Co. |
00 Xxxxx Xxxxxx |
Xxxxxx, Xxxxxxxxxxxxx
00000 |
Attn: Manager,
Securities Department |
Telephone:
(000) 000-0000 |
Facsimile: (000)
000-0000, |
or such other
address as the Fund or the Custodian may from time to time designate in writing
to |
24
the other. |
12.6 Headings.
Paragraph headings included herein are for convenience of reference only and
shall not modify, define, expand or limit any of the terms or provisions hereof. |
12.7 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. |
12.8 Confidentiality.
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. |
13. Definitions. The following defined terms will have the respective meanings set forth below. |
13.1 Advance
shall mean any extension of credit by or through the Custodian or by or through
any Subcustodian and shall include amounts paid to third parties for account of
the Fund or in discharge of any expense, tax or other item payable by the Fund |
13.2 Agency
Account shall mean any deposit account opened on the books of a Subcustodian
or other banking institution in accordance with Section 7.1. |
25
13.3 Agent
shall have the meaning set forth in the last system of Section 6. |
13.4 Applicable
Law shall mean with respect to each jurisdiction, all (a} laws, statutes, treaties,
regulations, guidelines (or their equivalents); (b) orders, interpretations licenses
and permits; and (c) judgments, decrees, injunctions writs, orders and similar actions
by a court of competent jurisdiction; compliance with which is required or customarily
observed in such jurisdiction. |
13.5 Authorized
Person shall mean any person or entity authorized to give Instructions on behalf
of the Fund in accordance with Section 4.1. |
13.6 Book-entry
Agent shall mean an entity acting as agent for the issuer of Investments for
purposes of recording ownership or similar entitlement to Investments, including
without limitation a transfer agent or registrar. |
13.7 Clearing
Corporation shall mean any entity or system established for purposes of providing
securities settlement and movement and associated functions for a given market. |
13.8 Delegation
Agreement shall mean any separate agreement entered into between the Custodian
and the Fund or its authorized representative with respect to certain matters concerning
the appointment and administration of Subcustodians delegated to the Custodian pursuant to Rule l7f-5. |
13.9 Foreign
Financial Regulatory Authority shall have the meaning given by Section 2(a)(50)
of the 1940 Act. |
13.10 Foreign
Custody Manager shall mean the Fund’s foreign custody manager appointed
pursuant to Rule 17f-5 of the 1940 Act. |
13.11 Funds
Transfer Services Agreement shall mean any separate agreement entered into between
the Custodian and the Fund or its authorized representative with respect to certain
matters concerning the processing of payment orders from Principal Accounts of the
Fund. |
13.12 Instruction(s)
shall have the meaning assigned in Section 4. |
13.13 Investment
Advisor shall mean any person or entity who is an Authorized Person to give
Instructions with respect to the investment and reinvestment of the Fund’s
Investments. |
13.14 Investments
shall mean any investment asset of the Fund, including without limitation securities,
bonds, notes, and debentures as well as receivables, derivatives, contractual rights
or entitlements and other intangible assets. |
13.15 Margin
Account shall have the meaning set forth in Section 6.4 hereof. |
13.16 Principal
Account shall mean deposit accounts of the Fund carried on the books of BBH&Co. as principal in accordance with Section 7. |
13.17 Safekeeping
Account shall mean an account established on the books of the Custodian or any
Subcustodian for purposes of segregating the interests of the Fund (or clients of
the Custodian or Subcustodian) from the assets of the Custodian or any Subcustodian. |
13.18 Securities
Depository shall mean a central or book entry system or agency established under
Applicable Law for purposes of recording the ownership and/or entitlement to investment
securities for a given market that, if a foreign Securities Depository, meets the
definitional requirements of Rule 17f-7 under the 1940 Act. |
26
13.19 Subcustodian
shall mean each foreign bank appointed by the Custodian pursuant to Section
8, but shall not include Securities Depositories. |
|
13.20 Tri-Party
Agreement shall have the meaning set forth in Section 6.4 hereof. |
|
13.21 1940
Act shall mean the Investment Company Act of 1940, as amended. |
|
14. Compensation. The Fund agrees to pay to the Custodian (a) a fee
in an amount set forth in the fee letter between the Fund and the Custodian in effect
on the date hereof or as amended from time to time, and (b) all authorized, customary
or reasonable out-of-pocket expenses incurred by the Custodian, including the fees
and expenses of all Subcustodians, and payable from time to time. Amounts payable
by the Fund under and pursuant to this Section 14 shall be payable by wire transfer
to the Custodian at BBH&Co. in New York, New York. |
|
15. Termination. This Agreement may be tenninated by either party in
accordance with the provisions of this Section. The provisions of this Agreement
and any other rights or obligations incurred or accrued by any party hereto prior
to tennination of this Agreement shall survive any termination of this Agreement. |
|
15.1 Notice
and Effect. This Agreement may be terminated by either party by written notice
effective no sooner than seventy-five days following the date that notice to such
effect shall be delivered to other party at its address set forth in paragraph 12.5
hereof. |
|
15.2 Successor Custodian. In the event of the appointment of a successor custodian,
it is agreed that the Investments of the Fund held by the Custodian or any Subcustodian
shall be delivered to the successor custodian in accordance with reasonable Instructions.
The Custodian agrees to cooperate with the Fund in the execution of documents and
performance of other actions necessary or desirable in order to facilitate the succession
of the new custodian. If no successor custodian shall be appointed, the Custodian
shall in like manner transfer the Fund’s Investments in accordance with Instructions. |
|
15.3
Delayed Succession. If no Instruction has been given as of the effective date
of tennination, Custodian may at any time on or after such termination date and
upon ten days written notice to the Fund either (a) deliver the Investments of the
Fund held hereunder to the Fund at the address designated for receipt of notices
hereunder; or (b) deliver any investments held |
27
hereunder
to a bank or trust company having a capitalization of $2 mi11ion United States Dollars
equivalent and operating under the Applicable law of the jurisdiction where such
Investments are located, such delivery to be at the risk of the Fund. In the event
that Investments or moneys of the Fund remain in the custody of the Custodian or
its Subcustodians after the date of termination owing to the failure of the Fund
to issue Instructions with respect to their disposition or owing to the fact that
such disposition could not be accomplished in accordance with such Instructions
despite diligent efforts of the Custodian, the Custodian shall be entitled to compensation
for its services with respect to such Investments and moneys during such period
as the Custodian or its Subcustodians retain possession of such items and the provisions
of this Agreement shall remain in full force and effect until disposition in accordance
with this Section is accomplished. |
|
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed as of the date first above written. | |
28
APPENDIX C
TO
BETWEEN
THE WORLD FUNDS, INC
and
XXXXX BROTHERS HARRJMAN & CO
Dated as of 8/30/20 l 0
The following is a list of Funds/Portfolios for which the Custodian shall serve under a Custodian Agreement dated as of 7/25/2005 “the Agreement”:
EASTERN EUROPEAN EQUITY FUND
THIRD MILLENIUM RUSSIA FUND
IN WITNESS WHEREOF, each of the parties hereto has caused this APPENDIX C to be executed in its name and on behalf of each such Fund/Portfolio.
THE WORLD
FUNDS, INC.
on be of each
of the Funds listed
APPENDIXC
17f-5 DELEGATION SCHEDULE | |
By its execution of this Delegation Schedule, THE WORLD FUNDS, INC., an open-end management investment company incorporated in Maryland and registered with the Commission under the 1940 Act (the Fund), on behalf of each of the series listed on the attached Appendix C as the same may from time to time be updated (each a Series) acting through its Board of Directors/Trustees or its duly appointed representative (the “Fund”), hereby appoints XXXXX BROTHERS XXXXXXXX & CO., a New York limited partnership with an office in Boston, Massachusetts (the “Delegate”) as its delegate to perform certain functions with respect to the custody of Fund’s Assets outside the United States. | |
1. Maintenance of Fund’s Assets Abroad. The Fund, acting through its Board or its duly authorized representative, hereby instructs Delegate pursuant to the terms of the Custodian Agreement to place and maintain the Fund’s Assets in countries outside the United States in accordance with Instructions received from the Fund’s investment advisor. Such instruction shall represent a Proper Instruction under the terms of the Custodian Agreement. The Fund acknowledges that - (a) the Delegate shall perform services hereunder only with respect to the countries where it provides custodial services to the Fund under the Custodian Agreement; (b) depending on conditions in the particular country, advance notice may be required before the Delegate shall be able to perform its duties hereunder in or with respect to such country (such advance notice to be reasonable in light of the specific facts and circumstances attendant to performance of duties in such country); and (c) nothing in this Delegation Schedule shall require the Delegate to provide delegated or custodial services in any country, and there may from time to time be countries as to which the Delegate determines it will not provide delegation services. | |
2. Delegation. Pursuant to the provisions of Rule 17f-5 under the 1940 Act as amended, the Board hereby delegates to the Delegate, and the Delegate hereby accepts such delegation and agrees to perform, only those duties set forth in this Delegation Schedule concerning the safekeeping of the Fund’s Assets in each of the countries as to which it acts as the Board’s delegate. The Delegate is hereby authorized to take such actions on behalf of or in the name of the Fund as are reasonably required to discharge its duties under this Delegation Schedule, including, without limitation, to cause the Fund’s Assets to be placed with a particular Eligible Foreign Custodian in accordance herewith. The Fund confirms to the Delegate that the Fund or its investment adviser has considered the Sovereign Risk and prevailing country risk as part of its continuing investment decision process, including such factors as may be reasonably related to the systemic risk of maintaining the Fund’s Assets in a particular country, |
including, but not limited to, financial infrastructure, prevailing custody and settlement systems and practices (including the use of any Securities Depository in the context of information provided by the Custodian in the performance of its duties as required under Rule 17f-7 and the terms of the Custodian Agreement governing such duties), and the laws relating to the safekeeping and recovery of the Fund’s Assets held in custody pursuant to the terms of the Custodian Agreement. | |
3. Selection of Eligible Foreign Custodian and Contract Administration. The Delegate shall perform the following duties with respect to the selection of Eligible Foreign Custodians and administration of certain contracts governing the Fund’s foreign custodial arrangements: | |
(a) Selection of Eligible Foreign Custodian. The Delegate shall place and maintain the Fund’s Assets with an Eligible Foreign Custodian; provided that the Delegate shall have determined that the Fund’s Assets will be subject to reasonable care based on the standards applicable to custodians in the relevant market after considering all factors relevant to the safekeeping of such assets including without limitation: | |
(i) The Eligible Foreign Custodian’s practices, procedures, and internal controls, including, but not limited to, the physical protections available for certificated securities (if applicable), the controls and procedures for dealing with any Securities Depository, the method of keeping custodial records, and the security and data protection practices; | |
(ii) Whether the Eligible Foreign Custodian has the requisite financial strength to provide reasonable care for the Fund’s Assets; | |
(iii) The Eligible Foreign Custodian’s general reputation and standing; and | |
(iv) Whether the Fund will have jurisdiction over and be able to enforce judgments against the Eligible Foreign Custodian, such as by virtue of the existence of any offices of such Eligible Foreign Custodian in the United States or such Eligible Foreign Custodian’s appointment of an agent for service of process in the United States or consent to jurisdiction in the United States. | |
The Delegate shall be required to make the foregoing determination to the best of its knowledge and belief based only on information reasonably available to it. | |
(b) Contract Administration. The Delegate shall cause that the foreign custody arrangements with an Eligible Foreign Custodian shall be governed by a written contract that the Delegate |
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has determined will provide reasonable care for Fund assets based on the standards applicable to custodians in the relevant market. Each such contract shall, except as set forth in the last paragraph of this subsection (b), include provisions that provide: | |
(i) For indemnification or insurance arrangements (or any combination of the foregoing) such that the Fund will be adequately protected against the risk of loss of assets held in accordance with such contract; | |
(ii) That the Fund’s Assets will not be subject to any right, charge, security interest, lien or claim of any kind in favor of the Eligible Foreign Custodian or its creditors except a claim of payment for their safe custody or administration or, in the case of cash deposits, liens or rights in favor of creditors of such Custodian arising under bankruptcy, insolvency or similar laws; | |
(iii) That beneficial ownership of the Fund’s Assets will be freely transferable without the payment of money or value other than for safe custody or administration; | |
(iv) That adequate records will be maintained identifying the Fund’s Assets as belonging to the Fund or as being held by a third party for the benefit of the Fund; | |
(v) That the Fund’s independent public accountants will be given access to those records described in (iv) above or confirmation of the contents of such records; and | |
(vi) That the Delegate will receive sufficient and timely periodic reports with respect to the safekeeping of the Fund’s Assets, including, but not limited to, notification of any transfer to or from the Fund’s account or a third party account containing the Fund’s Assets. | |
Such contract may contain, in lieu of any or all of the provisions specified in this Section 3 (b), such other provisions that the Delegate determines will provide, in their entirety, the same or a greater level of care and protection for the Fund’s Assets as the specified provisions , in their entirety. | |
(c) Limitation to Delegated Selection. Notwithstanding anything in this Delegation Schedule to the contrary, the duties under this Section 3 shall apply only to Eligible Foreign Custodians selected by the Delegate and shall not apply to Securities Depositories or to any Eligible Foreign Custodian that the Delegate is directed to use pursuant to Section 7. |
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4. Monitoring. The Delegate shall establish a system to monitor at reasonable |
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8. Standard of Care. In carrying out its duties under this Delegation Schedule, the Delegate agrees to exercise reasonable care, prudence and diligence such as a person having responsibility for safekeeping the Fund’s Assets would exercise. | |
9. Representations. The Delegate hereby represents and warrants that it is a U.S. Bank and that this Delegation Schedule has been duly authorized, executed and delivered by the Delegate and is a legal, valid and binding agreement of the Delegate. | |
The Fund hereby represents and warrants that its Board of Directors has determined that it is reasonable to rely on the Delegate to perform the delegated responsibilities provided for herein and that this Delegation Schedule has been duly authorized, executed and delivered by the Fund and is a legal, valid and binding agreement of the Fund. | |
10. Effectiveness; termination. This Delegation Schedule shall be effective as of the date on which this Delegation Schedule shall have been accepted by the Delegate, as indicated by the date set forth below the Delegate’s signature. This Delegation Schedule may be terminated at any time, without penalty, by written notice from the terminating party to the non-terminating party. Such termination shall be effective on the 30th day following the date on which the non-terminating party shall receive the foregoing notice. The foregoing to the contrary notwithstanding, this Delegation Schedule shall be deemed to have been terminated concurrently with the termination of the Custodian Agreement. | |
11. Notices. Notices and other communications under this Delegation Schedule are to be made in accordance with the arrangements designated for such purpose under the Custodian Agreement unless otherwise indicated in a writing referencing this Delegation Schedule and executed by both parties. | |
12. Definitions. Capitalized terms in this Delegation Schedule have the following meanings: | |
a. Eligible Foreign Custodian - shall have the meaning set forth in Rule 17f-5(a)(l) and shall also include a U.S. Bank. | |
b. Fund’s Assets - shall mean any of the Fund’s investments (including foreign currencies) for which the primary market is outside the United States, and such cash and cash equivalents as are reasonably necessary to effect the Fund’s transactions in such investments. |
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed as of the date first above written. |
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FUNDS TRANSFER SERVICES SCHEDULE TO CUSTODIAN AGREEMENT | |
1. Execution of Pavment Orders. Xxxxx Brothers Xxxxxxxx & Co. (the Custodian)
is hereby instructed by THE WORLD FUNDS, INC. (the Fund) on behalf of each of the
series listed on the attached Appendix C to execute each payment order, whether
denominated in United States dollars or other applicable currencies, received by
the Custodian in the Fund’s name as sender and authorized and confirmed by
an Authorized Person as defined in a Custodian Agreement dated as of July 25, 2005
by and between the Custodian and the Fund, as amended or restated from time thereafter
(the Agreement), provided that the Fund has sufficient available funds on deposit
in a Principal Account as defined in the Agreement and provided that the order (i)
is received by the Custodian in the manner specified in this Funds Transfer Services
Schedule or any amendment hereafter; (ii) complies with any written instructions
and restrictions of the Fund as set forth in this Funds Transfer Services Schedule
or any amendment hereafter; (iii) is authorized by the Fund or is verified by the
Custodian in compliance with a security procedure set forth in Paragraph 2 below
for verifying the authenticity of a funds transfer communication sent to the Custodian
in the name of the Fund or for the detection of errors set forth in any such communication;
and (iv) contains sufficient data to enable the Custodian to process such transfer. |
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[ ] | BIDS and BIDS Worldview Payment Products. BIDS and BIDS Worldview Payment Products, are on-line payment order authorization facilities with built-in authentication procedures. The Custodian and the Fund shall each be responsible for maintaining the confidentiality of passwords or other codes to be used by them in connection with BIDS. The Custodian will act on instructions received through BIDS without duty of further confirmation unless the Fund notifies the Custodian that its password is not secure. |
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] | SWIFT. The Custodian and the Fund shall comply with SWIFT’s authentication procedures. The Custodian will act on instructions received via SWIFT provided the instruction is authenticated by the SWIFT system. |
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[ ] | Tested Telex. The Custodian will accept payment orders sent by tested telex, provided the test key matches the algorithmic key the Custodian and Fund have agreed to use. |
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[ ] | Computer Transmission. The Custodian is able to accept transmissions sent from the Fund’s computer facilities to the Custodian’s computer facilities provided such transmissions are encrypted and digitally certified or are otherwise authenticated in a reasonable manner based on available technology. Such procedures shall be established in an operating protocol between the Custodian and the Fund. |
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[ ] | Telefax Instructions. A payment order transmitted to the Custodian by telefax transmission shall transmitted by the Fund to a telephone number specified from time to time by the Custodian for such purposes. Ifit detects no discrepancies, the Custodian will then either: |
1. | If the telefax requests a repetitive payment order, the Custodian may call the Fund at its last known telephone number, request to speak to the Fund or | ||
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Authorized Person, and confirm the authorization and the details of the payment order (a “Callback”); or | |||
2. | If the telefax requests a non-repetitive order, the Custodian will perform a Callback. |
All faxes must be accompanied by a fax cover sheet which indicates the sender’s name, Fund name, telephone number, fax number, number of pages, and number of transactions or instructions attached. | ||
] | Telephonic.
A telephonic payment order shall be called into the Custodian at the telephone
number designated from time to time by the Custodian for that purpose. The caller
shall identify herself/himself as an Authorized Person. The Custodian shall obtain
the payment order data from the caller. The Custodian shall then : |
l. | If a telephonic repetitive payment order, the Custodian may perform a Callback; | ||
or | |||
2. | If a telephonic non-repetitive payment order, the Custodian will perform a Callback. |
In the event the Fund chooses a procedure which is not a Security Procedure as described
above, the Fund agrees to be bound by any payment order (whether or not authorized)
issued in its name and accepted by the Custodian in compliance with the procedure
selected by the Fund. |
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3. Rejection of Payment Orders. The Custodian shall give the Fund timely notice
of the Custodian’s rejection of a payment order. Such notice may be given in
writing or orally by telephone, each of which is hereby deemed commercially reasonable. In the event the Custodian fails to execute a properly executable payment order
and fails to give the Fund notice of the Custodian’s non-execution , the Custodian
shall be liable only for the Fund’s actual damages and only to the extent
that such damages are recoverable under UCC 4A (as defined in Paragraph 7 below).
Notwithstanding anything in this Funds Transfer Services Schedule and the Agreement
to the contrary, the Custodian shall in no event be liable for any consequential
or special damages under this Funds Transfer Services Schedule, whether or not such
damages relate to services covered by UCC 4A, even if the Custodian has been advised
of the possibility of such damages. Whenever compensation in the form of interest
is payable by the Custodian to the Fund pursuant to this Funds Transfer Services
Schedule, such compensation will be payable at the rate specified in UCC 4A. |
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4. Cancellation of Payment Orders. The Fund may cancel a payment order but
the Custodian shall have no liability for the Custodian’s failure to act on
a cancellation instruction unless the Custodian has received such cancellation instruction
at a time and in a manner affording the Custodian reasonable opportunity to act
prior to the Custodian’s execution of the order. Any cancellation shall be
sent and confirmed in the manner set forth in Paragraph 2 above. |
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5. Responsibility for the Detection of Errors and Unauthorized Payment Orders. Except
as may be provided, the Custodian is not responsible for detecting any Fund error
contained in any payment order sent by the Fund to the Custodian. In the event that
the Fund’s payment order to the Custodian either (i) identifies the beneficiary
by both a name and an identifying or bank account number and the name and number
identify different persons or entities, or (ii) identifies any bank by both a name
and an identifying number and the number identifies a person or entity different
from the bank identified by name, execution of the payment order, payment to the
beneficiary, cancellation of the payment order or actions taken by any bank in respect
of such payment order may be made solely on the basis of the number. The Custodian
shall not be liable for interest on the amount of any payment order that was not
authorized or was erroneously executed unless the Fund so notifies the Custodian
within thirty (30) business days following the Fund’s receipt of notice that
such payment order had been processed. If a payment order in the name of the Fund |
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and accepted by the Custodian was not authorized by the Fund, the liability of the parties will be governed by the applicable provisions of UCC 4A. | |
6. Laws and Regulations. The rights and obligations of the Custodian and the
Fund with respect to any payment order executed pursuant to this Funds Transfer
Services Schedule will be governed by any applicable laws, regulations, circulars
and funds transfer system rules, the laws and regulations of the United States of
America and of other relevant countries including exchange control regulations and
limitations on dealings or other sanctions, and including without limitation those
sanctions imposed under the law of the United States of America by the Office of
Foreign Assets Control. Any taxes, fines, costs, charges or fees imposed by relevant
authorities on such transactions shall be for the account of the Fund. |
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7. Miscellaneous. All accounts opened by the Fund or its authorized agents
at the Custodian subsequent to the date hereof shall be governed by this Funds Transfer
Schedule. All terms used in this Funds Transfer Services Schedule shall have the
meaning set forth in Article 4A of the Uniform Commercial Code as currently in effect
in the State of New York (UCC 4A) unless otherwise set forth herein. The terms and
conditions of this Funds Transfer Services Schedule are in addition to, and do not
modify or otherwise affect, the terms and conditions of the Agreement and any other
agreement or arrangement between the parties hereto. |
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OPTIONAL:
The Custodian will perform a Callback if instructions are sent by telefax or telephonic
means as provided in Paragraph 2. THE FUND MAY, AT ITS OWN RISK AND BY HEREBY AGREEING
TO INDEMNIFY THE CUSTODIAN AND ITS PARTNERS, OFFICERS AND EMPLOYEES FOR ALL LOSSES
THEREFROM, ELECT TO WAIVE A CALLBACK BY THE CUSTODIAN BY INITIALLING HERE: - |
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Accepted and agreed: | ||
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