Exhibit No. 7
CUSTODIAN CONTRACT
Between
PAINEWEBBER MASTER SERIES, INC.
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
PAGE
1. Employment of Custodian and Property to be Held by It . . . . . . . . . .1
2. Duties of the Custodian with Respect to Property of the
Portfolios Held By the Custodian in the United States . . . . . . . . . .2
2.1 Holding Investments. . . . . . . . . . . . . . . . . . . . . . . . .2
2.2 Delivery of Securities.. . . . . . . . . . . . . . . . . . . . . . .2
2.3 Registration of Securities.. . . . . . . . . . . . . . . . . . . . .4
2.4 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.5 Availability of Federal Funds. . . . . . . . . . . . . . . . . . . .5
2.6 Collection of Income.. . . . . . . . . . . . . . . . . . . . . . . .5
2.7 Payment of Fund Monies.. . . . . . . . . . . . . . . . . . . . . . .5
2.8 Liability for Payment in Advance of Receipt of Securities
Purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.9 Appointment of Agents. . . . . . . . . . . . . . . . . . . . . . . .6
2.10 Deposit of Fund Assets in Securities Systems.. . . . . . . . . . . .7
2.11 Fund Assets Held in the Custodian's Direct Paper System. . . . . . .8
2.12 Segregated Account.. . . . . . . . . . . . . . . . . . . . . . . . .9
2.13 Ownership Certificates for Tax Purposes. . . . . . . . . . . . . . .9
2.14 Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
2.15 Communications Relating to Portfolio Securities. . . . . . . . . . .9
3. Payments for Sales or Repurchases or Redemptions of Shares
of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4. Proper Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. Actions Permitted without Express Authority . . . . . . . . . . . . . . 11
6. Evidence of Authority . . . . . . . . . . . . . . . . . . . . . . . . . 11
7. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income . . . . . . . . . . . . . 11
8. Records. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9. Opinion of Fund's Independent Accountant. . . . . . . . . . . . . . . . 12
10. Reports to Fund by Independent Public Accountants . . . . . . . . . . . 12
11. Compensation of Custodian . . . . . . . . . . . . . . . . . . . . . . . 12
12. Responsibility of Custodian . . . . . . . . . . . . . . . . . . . . . . 12
13. Mitigation by Custodian . . . . . . . . . . . . . . . . . . . . . . . . 14
14. Notification of Litigation; Right to Proceed. . . . . . . . . . . . . . 14
15. Effective Period, Termination and Amendment . . . . . . . . . . . . . . 14
16. Successor Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . 15
17. Additional Portfolios . . . . . . . . . . . . . . . . . . . . . . . . . 16
18. Interpretive and Additional Provisions. . . . . . . . . . . . . . . . . 16
19. Massachusetts Law to Apply. . . . . . . . . . . . . . . . . . . . . . . 16
20. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
21. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
22. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
23. Prior Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
24. Shareholder Communications Election . . . . . . . . . . . . . . . . . . 17
CUSTODIAN CONTRACT
This Contract between PaineWebber Master Series, Inc., a corporation
organized and existing under the laws of Maryland, having its principal place of
business at 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx, 00000 hereinafter
called the "Fund" and State Street Bank and Trust Company, a Massachusetts trust
company, having its principal place of business at 000 Xxxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx, 00000, hereinafter called the "Custodian".
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to initially offer shares in two series, the
PaineWebber Money Market Fund and the PaineWebber Balanced Fund (such series
together with all other series subsequently established by the Fund and made
subject to this Contract in accordance with paragraph 17, being herein referred
to as the "Portfolio(s)");
WHEREAS, the Fund desires to engage the Custodian to act as custodian of
the assets of the Portfolios;
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the assets of the
Portfolios pursuant to the provisions of the Articles of Incorporation. The Fund
agrees to deliver to the Custodian all securities and cash of the Portfolios,
and all payments of income, payments of principal or capital distributions
received by it with respect to all securities owned by the Portfolios from time
to time, and the cash consideration received by it for such new or treasury
shares of beneficial interest of the Portfolios ("Shares") as may be issued or
sold from time to time. The Custodian shall not be responsible for any property
of the Portfolios held or received by the Fund and not delivered to the
Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 4),
the Custodian shall on behalf of a Portfolio from time to time employ one or
more sub-custodians, located in the United States but only in accordance with an
applicable vote by the Board of Directors of the Fund, and provided that the
Custodian shall have no more or less responsibility or liability to the
Portfolio or the Fund on account of any actions or omissions of any sub-
custodian so employed than any such sub-custodian has to the Custodian.
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS HELD BY
THE CUSTODIAN IN THE UNITED STATES
2.1 HOLDING INVESTMENTS. The Custodian shall hold and physically segregate for
the account of each Portfolio all non-cash property, to be held by it in
the United States including all domestic securities owned by the Portfolio,
other than (a) securities which are maintained pursuant to Section 2.10 in
a clearing agency which acts as a securities depository or in a book-entry
system authorized by the U.S. Department of the Treasury and certain
federal agencies, (each, a "U.S. Securities System") and (b) commercial
paper of an issuer for which State Street Bank and Trust Company acts as
issuing and paying agent ("Direct Paper") which is deposited and/or
maintained in the Direct Paper System of the Custodian (the "Direct Paper
System") pursuant to Section 2.11.
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver domestic
securities owned by a Portfolio held by the Custodian or in a Securities
System account of the Custodian or in the Custodian's Direct Paper book
entry system account ("Direct Paper System Account") only upon receipt of
Proper Instructions from the Portfolio, which may be continuing
instructions when deemed appropriate by the parties, and only in the
following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund on
behalf of the Portfolio;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other similar
offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of the
Portfolio or into the name of any nominee or nominees of the Custodian
or into the name or nominee name of any agent appointed pursuant to
Section 2.9 or into the name or nominee name of any sub-custodian
appointed pursuant to Article 1; or for exchange for a different
number of bonds, certificates or other evidence representing the same
aggregate face amount or number of units; PROVIDED that, in any such
case, the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Portfolio, to
the broker or its clearing agent, against a receipt, for examination
in accordance with "street
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delivery" custom; provided that in any such case, the Custodian shall
have no responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Custodian's own negligence or
willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions
for conversion contained in such securities, or pursuant to any
deposit agreement; provided that, in any such case, the new securities
and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar securities
or the surrender of interim receipts or temporary securities for
definitive securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian:
10) For delivery in connection with any loans of securities made by the
Portfolio, BUT ONLY against receipt of adequate collateral as agreed
upon from time to time by the Custodian and the Portfolio, which may
be in the form of cash or obligations issued by the United States
government, its agencies or instrumentalities, except that in
connection with any loans for which collateral is to be credited to
the Custodian's account in the book-entry system authorized by the
U.S. Department of the Treasury, the Custodian will not be held liable
or responsible for the delivery of securities owned by the Portfolio
prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the
Portfolio requiring a pledge of assets by the Portfolio, BUT ONLY
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement among
the Fund on behalf of the Portfolio, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the "Exchange
Act") and a member of The National Association of Securities Dealers,
Inc. ("NASD"), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities
exchange, or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio;
13) For delivery in accordance with the provisions of any agreement among
the Fund on behalf of the Portfolio, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange Act,
relating to compliance with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar organization or
organizations, regarding account deposits in connection with
transactions by the Portfolio;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Portfolio, for delivery to such Transfer Agent or to
the holders of shares in
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connection with distributions in kind, as may be described from time
to time in the currently effective prospectus and statement of
additional information of the Fund relating to the Portfolio
("Prospectus"), in satisfaction of requests by holders of Shares for
repurchase or redemption; and
15) For any other proper corporate purpose, BUT ONLY upon receipt of, in
addition to Proper Instructions from the Portfolio, a certified copy
of a resolution of the Board of Directors or of the Executive
Committee signed by an officer of the Fund and certified by the
Secretary or an Assistant Secretary, specifying the securities of the
Portfolio to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom delivery
of such securities shall be made.
2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
applicable Portfolio or in the name of any nominee of the Portfolio or of
any nominee of the Custodian which nominee shall be assigned exclusively to
the Portfolio, UNLESS the Fund on behalf of the Portfolio has authorized in
writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as the
Portfolio, or in the name or nominee name of any agent appointed pursuant
to Section 2.9 or in the name or nominee name of any sub-custodian
appointed pursuant to Article 1. All securities accepted by the Custodian
on behalf of the Portfolios under the terms of this Contract shall be in
"street name" or other good delivery form. If, however, a Portfolio directs
the Custodian to maintain securities in "street name", the Custodian shall
utilize its best efforts only to timely collect income due the Portfolio on
such securities and to notify the Portfolio on a best efforts basis only of
relevant corporate actions including, without limitation, pendency of
calls, maturities, tender or exchange offers.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio,
which shall contain only property held by the Custodian as custodian for
the Portfolio, subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or
for the account of the Portfolio, other than cash maintained by the
Portfolio in a bank account established and used in accordance with Rule
17f-3 under the Investment Company Act of 1940, as amended (the "1940
Act"). Funds held by the Custodian for a Portfolio may be deposited by it
to its credit as Custodian in the Banking Department of the Custodian or in
such other banks or trust companies as it may in its discretion deem
necessary or desirable; PROVIDED, however, that every such bank or trust
company shall be qualified to act as a custodian under the 1940 Act and
that each such bank or trust company and the funds to be deposited with
each such bank or trust company shall on behalf of the Portfolio be
approved by vote of a majority of the Board of Directors of the Fund. Such
funds shall be deposited by the Custodian in its capacity as Custodian and
shall be withdrawable by the Custodian only in that capacity.
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2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund on
behalf of a Portfolio and the Custodian, the Custodian shall, upon the
receipt of Proper Instructions from the Portfolio, make federal funds
available to the Portfolio as of specified times agreed upon from time to
time by the Fund on behalf of the Portfolio and the Custodian in the amount
of checks received in payment for Shares of the Portfolio which are
deposited into the Portfolio's account.
2.6 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which a
Portfolio shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and
other payments with respect to bearer domestic securities if, on the date
of payment by the issuer, such securities are held by the Custodian or its
agent thereof and shall credit such income, as collected, to the
Portfolio's custodian account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when they become due
and shall collect interest when due on securities held hereunder. Income
due a Portfolio on securities loaned pursuant to the provisions of Section
2.2 (10) shall be the responsibility of the Portfolio. The Custodian will
have no duty or responsibility in connection therewith, other than to
provide the Portfolio with such information or data as may be necessary to
assist the Portfolio in arranging for the timely delivery to the Custodian
of the income to which the Portfolio is properly entitled.
2.7 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions from the
Portfolio, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out monies of the Portfolio in the
following cases only:
1) Upon the purchase of domestic securities, options, futures contracts
or options on futures contracts for the account of the Portfolio but
only (a) against the delivery of such securities or evidence of title
to such options, futures contracts or options on futures contracts to
the Custodian (or any bank, banking firm or trust company doing
business in the United States or abroad which is qualified under the
1940 Act, to act as a custodian and has been designated by the
Custodian as its agent for this purpose) registered in the name of the
Portfolio or in the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer; (b) in the case of
a purchase effected through a Securities System, in accordance with
the conditions set forth in Section 2.10 hereof; (c) in the case of a
purchase involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.11 hereof; (d) in the case of
repurchase agreements entered into between the Fund on behalf of the
Portfolio and the Custodian, or another bank, or a broker-dealer which
is a member of NASD, (i) against delivery of the securities either in
certificate form or through an entry crediting the Custodian's account
at the Federal Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by the Portfolio of
securities owned by the Custodian along with written evidence of the
agreement by the Custodian to
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repurchase such securities from the Portfolio; or (e) for transfer to
a time deposit account of the Portfolio in any bank, whether domestic
or foreign; such transfer may be effected prior to receipt of a
confirmation from a broker and/or the applicable bank pursuant to
Proper Instructions from the Portfolio as defined in Article 4 hereof;
2) In connection with conversion, exchange or surrender of securities
owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Portfolio as
set forth in Article 3 hereof;
4) For the payment of any expense or liability incurred by the Portfolio,
including but not limited to the following payments for the account of
the Portfolio: interest, taxes, management, accounting, transfer agent
and legal fees, and operating expenses of the Portfolio whether or not
such expenses are to be in whole or part capitalized or treated as
deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio declared
pursuant to the governing documents of the Fund relating to the
Portfolio;
6) For payment of the amount of dividends received in respect of
securities sold short; and
7) For any other proper purpose, BUT ONLY upon receipt of, in addition to
Proper Instructions from the Portfolio, a certified copy of a
resolution of the Board of Directors or of the Executive Committee of
the Fund on behalf of the Portfolio signed by an officer of the Fund
and certified by its Secretary or an Assistant Secretary, specifying
the amount of such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a proper purpose,
and naming the person or persons to whom such payment is to be made.
2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
Except as specifically stated otherwise in this Contract, in any and every
case where payment for purchase of domestic securities for the account of a
Portfolio is made by the Custodian in advance of receipt of the securities
purchased in the absence of specific written instructions from the
Portfolio to so pay in advance, the Custodian shall be absolutely liable to
the Portfolio for such securities to the same extent as if the securities
had been received by the Custodian.
2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the 1940 Act, to act as a
custodian, as its agent to carry out such of the provisions of this Article
2 as the Custodian may from time to time direct; PROVIDED, however, that
the appointment of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder. In the event of any loss, damage
or expense suffered or incurred by a
6
Portfolio caused by or resulting from the negligence or willful misconduct
of any agent appointed by the Custodian pursuant to this Section 2.9, the
Custodian shall promptly reimburse the Portfolio in the amount of such
loss, damage or expense.
2.10 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS. The Custodian may deposit
and/or maintain securities owned by a Portfolio in a clearing agency
registered with the Securities and Exchange Commission under Section 17A of
the Exchange Act, which acts as a securities depository, or in the
book-entry system authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to herein as "U.S.
Securities Systems" in accordance with applicable Federal Reserve Board and
Securities and Exchange Commission rules and regulations, if any, and
subject to the following provisions:
1) The Custodian may keep securities of a Portfolio in a U.S. Securities
System provided that such securities are represented in an account
("Account") of the Custodian in the U.S. Securities System which shall
not include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System shall
identify by book-entry those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for the account of
the Portfolio upon (i) receipt of advice from the U.S. Securities
System that such securities have been transferred to the Account, and
(ii) the making of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Portfolio. The
Custodian shall transfer securities sold for the account of the
Portfolio upon (i) receipt of advice from the U.S. Securities System
that payment for such securities has been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the Portfolio.
Copies of all advices from the U.S. Securities System of transfers of
securities for the account of the Portfolio shall identify the
Portfolio, be maintained for the Portfolio by the Custodian and be
provided to the Portfolio at its request. Upon request, the Custodian
shall furnish the Portfolio confirmation of each transfer to or from
the account of the Portfolio in the form of a written advice or notice
and shall furnish to the Portfolio copies of daily transaction sheets
reflecting each day's transactions in the U.S. Securities System for
the account of the Portfolio;
4) The Custodian shall provide the Portfolio with any report obtained by
the Custodian on the U.S. Securities System's accounting system,
internal accounting control and procedures for safeguarding securities
deposited in the U.S. Securities System;
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5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial certificate required by Article 15 hereof; and
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Portfolio for any loss or damage to
the Portfolio resulting from use of the U.S. Securities System by
reason of any negligence, misfeasance or misconduct of the Custodian
or any of its agents or of any of its or their employees or from
failure of the Custodian or any such agent to enforce effectively such
rights as it may have against the U.S. Securities System; at the
election of the Fund on behalf of the Portfolio, it shall be entitled
to be subrogated to the rights of the Custodian with respect to any
claim against the U.S. Securities System or any other person which the
Custodian may have as a consequence of any such loss or damage if and
to the extent that the Portfolio has not been made whole for any such
loss or damage. The Custodian agrees to cooperate with Fund in
connection with the enforcement of the Portfolio's subrogation rights.
2.11 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The Custodian may
deposit and/or maintain securities owned by a Portfolio in the Direct Paper
System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System will
be effected in the absence of Proper Instructions from the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct Paper
System only if such securities are represented in an account
("Account") of the Custodian in the Direct Paper System which shall
not include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the account of
the Portfolio upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to the
account of the Portfolio. The Custodian shall transfer securities sold
for the account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such transfer and receipt of
payment for the account of the Portfolio;
5) The Custodian shall furnish the Portfolio confirmation of each
transfer to or from the account of the Portfolio, in the form of a
written advice or notice, of Direct Paper on the next business day
following such transfer and shall furnish to the Portfolio copies of
daily transaction sheets reflecting each day's transaction in the
Securities System for the account of the Portfolio; and
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6) The Custodian shall provide the Portfolio with any report on its
system of internal accounting control as the Portfolio may reasonably
request from time to time.
2.12 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions from a Portfolio establish and maintain a segregated account
or accounts for and on behalf of the Portfolio, into which account or
accounts may be transferred cash and/or securities, including securities
maintained in an account by the Custodian pursuant to Section 2.10 hereof,
(i) in accordance with the provisions of any agreement among the Fund on
behalf of the Portfolio, the Custodian and a broker-dealer registered under
the Exchange Act and a member of the NASD (or any futures commission
merchant registered under the Commodity Exchange Act), relating to
compliance with the rules of The Options Clearing Corporation and of any
registered national securities exchange (or the Commodity Futures Trading
Commission or any registered contract market), or of any similar
organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Portfolio, (ii) for purposes of
segregating cash or government securities in connection with options
purchased, sold or written by the Portfolio or commodity futures contracts
or options thereon purchased or sold by the Portfolio, (iii) for the
purposes of compliance by the Portfolio with the procedures required by
Investment Company Act Release No. 10666, or any subsequent release or
releases of the Securities and Exchange Commission relating to the
maintenance of segregated accounts by registered investment companies and
(iv) for other proper corporate purposes, BUT ONLY, in the case of clause
(iv), upon receipt of, in addition to Proper Instructions from the
Portfolio, a certified copy of a resolution of the Board of Directors or of
the Executive Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes to be
proper corporate purposes.
2.13 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to domestic securities of the Portfolio held by it and in
connection with transfers of securities.
2.14 PROXIES. The Custodian shall, with respect to the domestic securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of
a Portfolio or a nominee of a Portfolio, all proxies, without indication of
the manner in which such proxies are to be voted, and shall promptly
deliver to the Portfolios such proxies, all proxy soliciting materials and
all notices relating to such securities.
2.15 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to the provisions
of Section 2.3, the Custodian shall transmit promptly to the Portfolios all
written information (including, without limitation, pendency of calls and
maturities of domestic securities and expirations of rights in connection
therewith and notices of exercise of call and put options written by the
Portfolios and the maturity of futures contracts purchased or sold by the
Portfolios) received by the Custodian from issuers of the securities being
held for
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the Portfolios. With respect to tender or exchange offers, the Custodian
shall transmit promptly to the Portfolios all written information received
by the Custodian from issuers of the securities whose tender or exchange is
sought and from the party (or his agents) making the tender or exchange
offer. If a Portfolio desires to take action with respect to any tender
offer, exchange offer or any other similar transaction, the Portfolio shall
notify the Custodian at least three business days prior to the date on
which the Custodian is to take such action.
3. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND
The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent of the Portfolios and deposit into the account of the applicable
Portfolio such payments as are received for Shares of the Portfolio issued or
sold from time to time by the Portfolio. The Custodian will provide timely
notification to the Portfolios and the Transfer Agent of any receipt by it of
payments for Shares of the Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Articles of Incorporation and any applicable votes of the
Board of Directors of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the redemption
or repurchase of Shares, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares, the Custodian shall honor checks drawn on the Custodian
by a holder of Shares, which checks have been furnished by the Portfolio to the
holder of Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to time between
the Fund on behalf of the Portfolio and the Custodian.
4. PROPER INSTRUCTIONS
Proper Instructions as used throughout this Contract means a writing signed
or initialed by two or more persons as the Board of Directors shall have from
time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific statement of
the purpose for which such action is requested and may be in the form of
standing instructions. Oral instructions will be considered Proper Instructions
if the Custodian reasonably believes them to have been given by a person
authorized to give such instructions with respect to the transaction involved.
The Portfolios shall cause all oral instructions to be confirmed in writing.
Upon receipt of a certificate of the Secretary or an Assistant Secretary as to
the authorization by the Board of Directors of the Fund accompanied by a
detailed description of procedures approved by the Board of Directors, Proper
Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board of Directors
and the Custodian are satisfied that such procedures afford adequate safeguards
for the Portfolios' assets. For purposes of this Section, Proper Instructions
shall include instructions
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received by the Custodian pursuant to any three-party agreement which requires a
segregated asset account in accordance with Section 2.12.
5. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from a
Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, PROVIDED that all such payments shall be accounted for to
the Portfolios;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolios, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Portfolios except as
otherwise directed by the Board of Directors of the Fund.
6. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of a Portfolio. The
Custodian may receive and accept a certified copy of a vote of the Board of
Directors of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Directors pursuant to the Articles of Incorporation as described
in such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
7. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION OF
NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Directors of the Fund to keep the
books of account of a Portfolio and/or compute the net asset value per share of
the outstanding shares of a Portfolio or, if directed in writing to do so by
the Portfolio, shall itself keep such books of account and/or compute such net
asset value per share. If so directed, the Custodian shall also calculate daily
the net income of the Portfolio as described in the Fund's currently effective
prospectus and shall advise the Portfolio and the Transfer Agent daily of the
total amounts of such net income and, if instructed in writing by an officer of
the Portfolio to do so, shall advise the Transfer Agent periodically of the
division of such net income among its various components. The calculations of
the net asset value per share and the daily income of the Portfolios shall be
made at the time or times described from time to time in the Fund's currently
effective prospectus.
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8. RECORDS
The Custodian shall with respect to the Portfolios create, maintain and
retain all records relating to its activities and obligations under this
Contract in such manner as will meet the obligations of the Portfolios under the
1940 Act, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the Portfolios and
shall at all times during the regular business hours of the Custodian be open
for inspection by duly authorized officers, employees or agents of the Fund and
the Portfolios, attorneys for and auditors employed by the Fund or the
Portfolios, and employees and agents of the Securities and Exchange Commission.
The Custodian shall, at a Portfolio's request, supply the Portfolio with a
tabulation of securities owned by the Portfolio and held by the Custodian and
shall, when requested to do so by a Portfolio and for such compensation as shall
be agreed upon between the Fund on behalf of the Portfolio and the Custodian,
include certificate numbers in such tabulations.
9. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund may from time
to time request, to obtain from year to year favorable opinions from the Fund's
independent accountants with respect to its activities hereunder in connection
with the preparation of the Fund's Form N-lA, and Form N-SAR or other annual
reports to the Securities and Exchange Commission and with respect to any other
requirements of such Commission.
10. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports, shall be
of sufficient scope and in sufficient detail, as may reasonably be required by
the Fund to provide reasonable assurance that any material inadequacies would
be disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
11. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fund and
the Custodian.
12. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in
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acting upon any notice, request, consent, certificate or other instrument
reasonably believed by it to be genuine and to be signed by the proper party or
parties, including any futures commission merchant acting pursuant to the terms
of a three-party futures or options agreement. The Custodian shall be held to
the exercise of reasonable care in carrying out the provisions of this Contract,
but shall be kept indemnified by and shall be without liability to the Fund or
the Portfolios for any action taken or omitted by it in good faith without
negligence. It shall be entitled to rely on and may act upon advice of counsel
(who may be counsel for the Fund) on all matters, and shall be without liability
for any action reasonably taken or omitted pursuant to such advice.
If a Portfolio requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Portfolio being liable for the payment of money or incurring liability of
some other form, the Fund on behalf of the Portfolio, as a prerequisite to
requiring the Custodian to take such action, shall provide indemnity to the
Custodian in an amount and form satisfactory to it.
If a Portfolio requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlement)
including the purchase or sale of foreign exchange or of contracts for foreign
exchange ("Advance") or in the event that the Custodian or its nominee shall
incur or be assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Contract, except such as
may arise from its or its nominee's own negligent action, negligent failure to
act or willful misconduct ("Liability"), then in such event property equal in
value to not more than 125% of such Advance and accrued interest on the Advance
or the anticipated amount of such Liability, held at any time for the account of
the Portfolio by the Custodian or sub-custodian may be held as security for such
Liability or for such Advance and accrued interest on the Advance. The Custodian
shall designate the security or securities constituting security for an Advance
or Liability (the "Designated Securities") by notice in writing to the Portfolio
(which may be sent by tested telefax or telex). In the event the value of the
Designated Securities shall decline to less than 110% of the amount of such
Advance and accrued interest on the Advance or the anticipated amount of such
Liability, then the Custodian may designate in the same manner an additional
security for such obligation ("Additional Securities"), but the aggregate value
of the Designated Securities and Additional Securities shall not be in excess of
125% of the amount of such Advance and the accrued interest on the Advance or
the anticipated amount of such Liability. At the request of the Portfolio, on
behalf of a Portfolio, the Custodian shall agree to substitution of a security
or securities which have a value equal to the value of the Designated or
Additional Securities which the Portfolio desires be released from their status
as security, and such release from status as security shall be effective upon
the Custodian and the Fund agreeing in writing as to the identity of the
substituted security or securities, which shall thereupon become Designated
Securities.
Notwithstanding the above, the Custodian shall, at the request of a
Portfolio, immediately release from their status as security any or all of the
Designated Securities or Additional
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Securities upon the Custodian's receipt from the Portfolio of cash or cash
equivalents in an amount equal to 100% of the value of the Designated Securities
or Additional Securities that the Portfolio desires to be released from their
status as security pursuant to this Article. Interest, dividends and other
distributions paid or received on the Designated Securities and Additional
Securities, other than payments of principal or payments upon retirement,
redemption or repurchase, shall remain the property of the Portfolio and shall
not be subject to this Article.
13. MITIGATION BY CUSTODIAN
Upon the occurrence of any event connected with the duties of the Custodian
under this Contract which causes or may cause any loss, damage or expense to a
Portfolio, (i) the Custodian shall, and (ii) shall exercise reasonable efforts
to cause any sub-custodian to, use reasonable efforts and take all reasonable
steps under the circumstances to mitigate the effect of such event and to avoid
continuing harm to the Portfolio.
14. NOTIFICATION OF LITIGATION; RIGHT TO PROCEED
The Fund shall not be liable for indemnification under this Contract to the
extent that the Fund's ability to defend against any litigation or proceeding
brought against the Custodian in respect of which indemnity may be sought under
this Contract is prejudiced by the Custodian's failure to give prompt notice of
the commencement of any such litigation or proceeding. With respect to claims in
such litigation or proceeding for which indemnity by the Fund may be sought and,
subject to applicable law and the ruling of any court of competent jurisdiction,
the Fund shall be entitled to participate in any such litigation or proceeding
and, after written notice from the Fund to the Custodian, the Fund may assume
the defense of such litigation or proceeding with counsel of its choice at its
own expense in respect of that portion of the litigation for which the Fund may
be subject to an indemnification obligation; provided, however, that the
Custodian shall be entitled to participate in the defense of any such litigation
or proceeding. If the Fund has acknowledged in writing its obligation to
indemnify the Custodian with respect to such litigation or proceeding, the
Custodian's participation shall be at its own expense and the Fund shall control
the defense of the litigation or proceeding. If the Fund is not permitted to
participate in or control such litigation or proceeding under applicable law or
by a ruling of a court of competent jurisdiction, the Custodian shall reasonably
prosecute such litigation or proceeding. The Custodian shall not consent to the
entry of any judgment or enter into any settlement in any such litigation or
proceeding without providing the Fund with adequate notice of any such
settlement or judgment, and without the Fund's prior written consent. The
Custodian shall submit written evidence to the Fund with respect to any cost or
expense for which it is seeking indemnification in such form and detail as the
Fund may reasonably request.
15. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than
14
thirty (30) days after the date of such delivery or mailing; PROVIDED, however
that the Custodian shall not act under Section 2.10 hereof in the absence of
receipt of an initial certificate of the Secretary or an Assistant Secretary
that the Board of Directors of the Fund has approved the initial use of a
particular Securities System by the Fund, as required by Rule 17-4 under the
1940 Act and that the Custodian shall not act under Section 2.11 hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Directors has approved the initial use of the Direct
Paper System by the Fund; PROVIDED FURTHER, however, that the Fund shall not
amend or terminate this Contract in contravention of any applicable federal or
state regulations, or any provision of the Articles of Incorporation, and
further provided, that the Fund may at any time by action of its Board of
Directors (i) substitute another bank or trust company for the Custodian by
giving notice as described above to the Custodian, or (ii) immediately terminate
this Contract in the event of the appointment of a conservator or receiver for
the Custodian by the Comptroller of the Currency or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian such
compensation as may be due as of the date of such termination and shall likewise
reimburse the Custodian for its costs, expenses and disbursements.
16. SUCCESSOR CUSTODIAN
If a successor custodian for a Portfolio shall be appointed by the Board of
Directors of the Fund, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed and in the
form for transfer, all securities of the Portfolio then held by it hereunder and
shall transfer to an account of the successor custodian all of the securities of
the Portfolio held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the 1940 Act, doing business in Boston,
Massachusetts, of its own selection, having an aggregate capital, surplus, and
undivided profits, as shown by its last published report, of not less than
$25,000,000, all securities, funds and other properties held by the Custodian on
behalf of the Portfolio and all instruments held by the Custodian relative
thereto and all other property held by it under this Contract on behalf of the
Portfolio and to transfer to an account of such successor custodian all of the
securities of the Portfolio held in any Securities System. Thereafter, such bank
or trust company shall be the successor of the Custodian under this Contract.
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In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of a Portfolio to procure the certified copy of the vote referred to or
of the Board of Directors to appoint a successor custodian, the Custodian shall
be entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
17. ADDITIONAL PORTFOLIOS
In the event that the Fund establishes one or more series of Shares in
addition to PaineWebber Money Market Fund and PaineWebber Balanced Fund with
respect to which it desires to have the Custodian render services as custodian
under the terms hereof, it shall so notify the Custodian in writing, and if the
Custodian agrees in writing to provide such services, such series of Shares
shall become a Portfolio hereunder.
18. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Contract, the Custodian and the
Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, PROVIDED that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Articles of Incorporation of the Fund. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be an
amendment of this Contract.
19. MASSACHUSETTS LAW TO APPLY
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
20. CONFIDENTIALITY
The Custodian agrees that all books records, information and data
pertaining to the business of the Portfolios which are exchanged or received
pursuant to the negotiation or carrying out of this Contract shall remain
confidential, shall not be voluntarily disclosed to any other person, except as
may be required by law, and shall not be used by the Custodian for any purpose
not directly related to the business of the Fund, except with the Fund's prior
written consent.
21. ASSIGNMENT
Neither the Fund nor the Custodian shall have the right to assign any of
its rights or obligations under this Contract without the prior written consent
of the other party.
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22. SEVERABILITY
If any provision of this Contract is held to be unenforceable as a matter
of law, the other terms and provisions of this Contract shall not be affected
thereby and shall remain in full force and effect.
23. PRIOR CONTRACTS
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund and the Custodian relating to the custody of the
Portfolio's assets.
24. SHAREHOLDER COMMUNICATIONS ELECTION
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Portfolio's name, address, and share position to
requesting companies whose securities the Portfolio owns. If the Fund tells the
Custodian "no", the Custodian will not provide this information to requesting
companies. If the Fund tells the Custodian "yes" or does not check either "yes"
or "no" below, the Custodian is required by the rule to treat the Fund as
consenting to disclosure of this information for all securities owned by the
Portfolios or any funds or accounts established by the Fund. For the Fund's
protection, the Rule prohibits the requesting company from using the Fund's name
and address for any purpose other than corporate communications. Please indicate
below whether the Fund consents or objects by checking one of the alternatives
below.
YES [ ] The Custodian is authorized to release the Portfolio's name,
address and share positions.
NO [X] The Custodian is not authorized to release the Portfolio's name,
address and share positions.
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IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 1st day of March, 1996 .
PAINEWEBBER MASTER SERIES, INC.
BY:/s/ Xxxxxx X. X'Xxxxxxx
--------------------------------
XXXXXX X'XXXXXXX
SECRETARY AND VICE PRESIDENT
STATE STREET BANK AND TRUST
COMPANY
By:/s/
--------------------------------
Executive Vice President
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