CUSTODIAN CONTRACT
Between
ALLIANCE UTILITY INCOME FUND, INC.
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
1. Employment of Custodian and Property to be Held by
It................................................
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United
States............................................
2.1 Holding Securities..........................
2.2 Delivery of Securities......................
2.3 Registration of Securities..................
2.4 Bank Accounts...............................
2.5 Availability of Federal Funds...............
2.6 Collection of Income........................
2.7 Payment of Fund Moneys......................
2.8 Liability for Payment in Advance of Receipt
of Securities Purchased.....................
2.9 Appointment of Agents.......................
2.10 Deposit of Securities in Securities Systems
2.10A Fund Assets Held in the Custodian's Direct
Paper System................................
2.11 Segregated Account..........................
2.12 Ownership Certificates for Tax Purposes.....
2.13 Proxies.....................................
2.14 Communications Relating to Fund Portfolio
Securities..................................
2.15 Reports to Fund by Independent Public
Accountants.................................
3. Duties of the Custodian with Respect to Property
of the Fund Held Outside of the United States.....
3.1 Appointment of Foreign Sub-Custodians.......
3.2 Assets to be Held...........................
3.3 Foreign Securities Depositories.............
3.4 Agreements with Foreign Banking Institutions
3.5 Access of Independent Accountants of the
Fund........................................
3.6 Reports by Custodian........................
3.7 Transactions in Foreign Custody Account.....
3.8 Liability of Foreign Sub-Custodians.........
3.9 Liability of Custodian......................
3.10 Reimbursement for Advances..................
3.11 Monitoring Responsibilities.................
3.12 Branches of U.S. Banks......................
3.13 Tax Law.....................................
4. Payments for Repurchases or Redemptions and Sales
of Shares of the Fund.............................
2
5. Proper Instructions...............................
6. Actions Permitted without Express Authority.......
7. Evidence of Authority.............................
8. Duties of Custodian with Respect to the Books of
Account and Calculations of Net Asset Value and
Net Income........................................
9. Records...........................................
10. Opinion of Fund's Independent Accountant..........
11. Compensation of Custodian.........................
12. Responsibility of Custodian.......................
13. Effective Period, Termination and Amendment.......
14. Successor Custodian...............................
15. Interpretive and Additional Provisions............
16. Massachusetts Law to Apply........................
17. Prior Contracts...................................
18. Shareholder Communications Election...............
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CUSTODIAN CONTRACT
This Contract between Alliance Utility Income Fund,
Inc., a corporation organized and exiting 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 corporation, having its
principal place of business at 000 Xxxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx, 00000, hereinafter called the "Custodian",
WITNESSETH: That 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 its assets, including securities it desires to
be held in places within the United States ("domestic
securities") and securities it desires to be held outside
the United States ("foreign securities") pursuant to the
provisions of the Articles of Incorporation. The Fund agrees
to deliver to the Custodian all securities and cash owned by
it, and all payments of income, payments of principal or
capital distributions received by it with respect to all
securities owned by the Fund from time to time, and the cash
4
consideration received by it for such new or treasury shares
of capital stock, $ par value, ("Shares") of the Fund as
may be issued or sold from time to time. The Custodian
shall not be responsible for any property of the Fund held
or received by the Fund and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the
meaning of Article 5), the Custodian shall 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 Fund on account of any actions of omissions
of any sub-custodian so employed than any such sub-custodian
has to the Custodian. The Custodian may employ as sub-
custodians for the Fund's securities and other assets the
foreign banking institutions and foreign securities
depositories designated in Schedule "A" hereto but only in
accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of
the Fund Held By the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and
physically segregate for the account of the Fund
all non-cash property, to be held by it in the
United States, including all domestic securities
owned by the Fund, other than (a) securities which
5
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, collectively
referred to herein as "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 pursuant to Section 2.10A.
2.2 Delivery of Securities. The Custodian shall
release and deliver domestic securities owned by
the Fund 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, 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 Fund 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;
6
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
portfolio securities of the Fund;
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 Fund 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,
7
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 Fund, to the broker or its
clearing agent, against a receipt, for
examination in accordance with "street
delivery" custom; provided that in any
such case, the Custodian shall have no
responsibility, or liability for any loss
arising from the delivery of such
securities prior to receiving payment for
such securities except as may arise from
the Custodian's own negligence or willful
misconduct;
8) For exchange or conversion pursuant to
any plan of merger, consolidation,
recapitalization, reorganization or
readjustment of the securities of the
issuer of such securities, or pursuant to
provisions for conversion contained in
such securities, or pursuant to any
deposit agreement; provided that, in any
such case, the new securities and cash,
if any, are to be delivered to the
Custodian;
8
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 Fund, but only
against receipt of adequate collateral as
agreed upon from time to time by the
Custodian and the Fund, 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
deliver, of securities owned by the Fund
prior to the receipt of such collateral;
9
11) For delivery as security in connection
with any borrowings by the Fund requiring
a pledge of assets by the Fund, but only
against receipt of amounts borrowed;
12) For delivery in accordance with the
provisions of any agreement among among
the Fund, 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 Fund;
13) For delivery in accordance with the
provisions of any agreement among the
Fund, 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
10
and/or any Contract Market, or any
similar organization or organizations,
regarding account deposits in connection
with transactions by the Fund;
14) Upon receipt of instructions from the
transfer agent ("Transfer Agent") for the
fund, for deliver, to such Transfer Agent
or to the holders of shares in connection
with distributions in kind, as may be
described from time to time in the Fund's
currently effective prospectus and
statement of additional information
("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, a certified copy of
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 to be
delivered, setting forth the purpose for
which such delivery is to be made,
11
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
Fund or in the name of any nominee of the Fund or
of any nominee of the Custodian which nominee shall
be assigned exclusively to the Fund, unless the
Fund has authorized in writing the appointment of a
nominee to be used in common with other registered
investment companies having the same investment
adviser as the Fund, or in the name or nominee 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 Fund
under the terms of this Contract shall be in
"street name" or other good delivery form. If,
however, the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall
utilize its best efforts only to timely collect
income due the Fund on such securities and to
notify the fund on a best efforts basis only of
12
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 the Fund, 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 Fund, other than cash maintained by
the Fund in a bank account established and used in
accordance with Rule 17f-3 under the Investment
Company Act of 1940. Funds held by the Custodian
for the Fund 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 Investment Company Act of 1940
and that each such bank or trust company and the
funds to be deposited with each such bank or trust
company shall be approved by vote of a majority of
the Board of Directors of the Fund. Such funds
13
shall be deposited by the Custodian in its capacity
as Custodian and shall be withdrawable by the
Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual
agreement between the Fund and the Custodian, the
Custodian shall, upon the receipt of Proper
Instructions, make federal funds available to the
Fund as of specified times agreed upon from time to
time by the Fund and the Custodian in the amount of
checks received in payment for Shares of the Fund
which are deposited into the Fund'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 United States registered securities held
hereunder to which the Fund 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
United States bearer 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 Fund's custodian
account. Without limiting the generality of the
foregoing, the Custodian shall detach and present
14
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 the Fund on United
States securities loaned pursuant to the provisions
of Section 2.2 (10) shall be the responsibility of
the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than
to provide the Fund with such information or data
as may be necessary to assist the Fund in arranging
for the timely delivery to the Custodian of the
income to which the Fund is properly entitled.
2.7 Payment of Fund Moneys. Upon receipt of Proper
Instructions, which may be continuing instructions
when deemed appropriate by the parties, the
Custodian shall pay out monies of the Fund in the
following cases only:
1) Upon the purchase of domestic securities,
futures contracts or options on futures
contracts for the account of the Fund 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
15
doing business in the United States or
abroad which is qualified under the
Investment Company Act of 1940, as
amended, to act as a custodian and has
been designated by the Custodian as its
agent for this purpose) registered in the
name of the Fund 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 or (c) in the case
of repurchase involving the Direct paper
System, in accordance with the conditions
set forth in Section 2.10A hereof; (d) in
the case of repurchase agreements entered
into between the Fund 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
16
evidencing purchase by the Fund of
securities owned by the Custodian along
with written evidence of the agreement by
the Custodian to repurchase such
securities from the Fund or (e) for
transfer to a time deposit account of the
Fund in any bank, whether domestic or
foreign; such transfer may be effected
prior to receipt of a confirmation from a
broker and/or the applicable bank
pursuant to Proper Instructions from the
Fund as defined in Article 5;
2) In connection with conversion, exchange
or surrender of securities owned by the
Fund as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of
Shares issued by the Fund as set forth in
Article 4 hereof;
4) For the payment of any expense or
liability incurred by the Fund, including
but not limited to the following payments
for the account of the Fund: interest,
taxes, management, accounting, transfer
agent and legal fees, and operating
expenses of the Fund whether or not such
17
expenses are to be in whole or part
capitalized or treated as deferred
expenses;
5) For the payment of any dividends declared
pursuant to the governing documents of
the Fund;
6) For payment of the amount of dividends
received in respect of securities sold
short;
7) For any other proper purpose, but only
upon receipt of, in addition to Proper
Instructions, a certified copy of a
resolution of the Board of Directors or
of the Executive Committee of the Fund
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
18
otherwise in this Contract, in any and every case
where payment for purchase of domestic securities
for the account of the Fund is made by the
Custodian in advance of receipt of the securities
purchased in the absence of specific written
instructions from the Fund to so pay in advance,
the Custodian shall be absolutely liable to the
Fund 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 Investment
Company Act of 1940, as amended, 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.
2.10 Deposit of Securities in Securities Systems. The
Custodian may deposit and/or maintain domestic
securities owned by the Fund in a clearing agency
registered with the Securities and Exchange
Commission under Section 17A of the Securities
19
Exchange Act of 1934, 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 "Securities System" 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 domestic
securities of the Fund in a Securities
System provided that such securities are
represented in an account ("Account") of
the Custodian in the 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 domestic securities of the Fund which
are maintained in a Securities System
shall identify by book-entry those
securities belonging to the Fund;
3) The Custodian shall pay for domestic
securities purchased for the account of
the Fund upon (i) receipt of advice from
20
the 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 Fund. The Custodian shall
transfer domestic securities sold for the
account of the Fund upon (i) receipt of
advice from the 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 Fund.
Copies of all advice from the Securities
System of transfers of domestic
securities for the account of the Fund
shall identify the Fund, be maintained
for the Fund by the Custodian and be
provided to the Fund at its request. Upon
request, the Custodian shall furnish the
Fund confirmation of each transfer to or
from the account of the Fund in the form
of a written advice or notice and shall
furnish to the Fund copies of daily
21
transaction sheets reflecting each day's
transactions in the Securities System for
the account of the Fund.
4) The Custodian shall provide the Fund with
any report obtained by the Custodian on
the Securities System's accounting
system, internal accounting control and
procedures for safeguarding domestic
securities deposited in the Securities
System;
5) The Custodian shall have received the
initial or annual certificate, as the
case may be, required by Article 13
hereof;
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be
liable to the Fund for any loss or damage
to the Fund resulting from use of the
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 Securities
22
System; at the election of the Fund, it
shall be entitled to be subrogated to the
rights of the Custodian with respect to
any claim against the Securities System
or any other person which the Custodian
may have as a consequence of any such
lose or damage if and to the extent that
the Fund has not been made whole for any
such loss or damage.
2.10A Fund Assets Held in the Custodian's Direct Paper
System The Custodian may deposit and/or maintain
securities owned by the Fund 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;
2) The Custodian may keep securities of the
Fund 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;
23
3) The records of the Custodian with respect
to securities of the Fund which are
maintained in the Direct Paper System
shall identify by book-entry those
securities belonging to the Fund;
4) The Custodian shall pay for securities
purchased for the account of the Fund
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 Fund. The Custodian shall
transfer securities sold for the account
of the Fund 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 Fund;
5) The Custodian shall furnish the Fund
confirmation of each transfer to or from
the account of the Fund, in the form of a
written advice or notice, of Direct Paper
on the next business day following such
transfer and shall furnish to the Fund
copies of daily transaction sheets
reflecting each day's transaction in the
24
Securities System for the account of the
Fund;
6) The Custodian shall provide the Fund with
any report on its system of internal
accounting control as the Fund may
reasonably request from time to time;
2.11 Segregated Account. The Custodian shall upon
receipt of Proper Instructions establish and
maintain a segregated account or accounts for and
on behalf of the Fund, 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, 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
25
Fund, (ii) for purposes of segregating cash or
government securities in connection with options
purchased, sold or written by the Fund or commodity
futures contracts or options thereon purchased or
sold by the Fund, (iii) for the purposes of
compliance by the Fund 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, 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.
2.12 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
26
securities of the Fund held by it and in connection
with transfers of such securities.
2.13 Proxies. The Custodian shall, with respect to the
domestic securities held hereunder, cause to be
promptly executed by the registered holder of such
securities, if the securities are registered
otherwise than in the name of the Fund or a nominee
of the Fund, all proxies, without indication of the
manner in which such proxies are to be voted, and
shall promptly deliver to the Fund such proxies,
all proxy soliciting materials and all notices
relating to such securities.
2.14 Communications Relating to Fund Portfolio
Securities.
Subject to the provisions of Section 2.3, the
Custodian shall transmit promptly to the Fund all
written information (including, without limitation,
pendency of calls and maturities of domestic
securities and expirations of rights in connection
therewith and notices of exercise of call and put
options written by the Fund and the maturity of
futures contracts purchased or sold by the Fund)
received by the Custodian from issuers of the
domestic securities being held for the Fund. With
respect to tender or exchange offers, the Custodian
27
shall transmit promptly to the Fund all written
information received by the Custodian from issuers
of the domestic securities whose tender or exchange
is sought and from the party (or his agents) making
the tender or exchange offer. If the Fund desires
to take action with respect to any tender offer,
exchange offer or any other similar transaction,
the Fund shall notify the Custodian at least three
business days prior to the date on which the
Custodian is to take such action.
2.15 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 domestic
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
28
examination, and, if there are no such
inadequacies, the reports shall so state.
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States
3.1 Appointment of Foreign Sub-Custodians.
The fund hereby authorizes and instructs the
Custodian to employ as sub-custodian for the Fund's
securities and other assets maintained outside of
the United States the foreign banking institutions
and foreign securities depositories designated on
Schedule A hereto ("foreign sub-custodians"). Upon
receipt of "Proper Instructions", as defined in
Section 5 of this Contract, together with a
certified resolution of the Fund's Board of
Directors, the Custodian and the Fund may agree to
amend Schedule A hereto from time to time to
designate additional foreign banking institutions
and foreign securities depositories to act as sub-
custodians. Upon receipt of Proper Instructions
from the Fund the Custodian shall cease the
employment of any one or more of such sub-
custodians for maintaining custody of the Fund's
assets.
3.2 Assets to be Held. The Custodian shall limit the
securities and other assets maintained in the
29
custody of the foreign sub-custodians to: (a)
"foreign securities, as defined in paragraph (c)(l)
of Rule 17f-5 under the Investment Company Act of
1940, and (b) cash and cash equivalents in such
amounts as the Custodian or the Fund may determine
to be reasonably necessary to effect the Fund's
foreign securities transactions. The Custodian
shall identify on its books as belonging to the
Fund, the foreign securities of the Fund held by
each foreign sub-custodian.
3.3 Foreign Securities Depositories. Except as may
otherwise be agreed upon in writing by the
Custodian and the Fund, assets of the Fund shall be
maintained in foreign securities depositories only
through arrangements implemented by the foreign
banking institutions serving as sub-custodians
pursuant to the terms hereof. Where possible, such
arrangements shall include entry into agreements
containing the provisions set forth in Section 3.4
hereof.
3.4 Agreements with Foreign Banking Institutions. Each
agreement with a foreign banking institution shall
be substantially in the form set forth in Exhibit 1
hereto and shall provide that: (a) the Fund's
assets will not be subject to any right, charge,
30
security interest, lien or claim of any kind in
favor of the foreign banking institution or its
creditors or agent, except a claim of payment for
their safe custody or administration;
(b) beneficial ownership of the Fund's assets will
be freely transferable without the payment of money
or value other than for custody or administration;
(c) adequate records will be maintained identifying
the assets as belonging to the Fund; (d) officers
of or auditors employed by, or other
representatives of the Custodian, including to the
extent permitted under applicable law the
independent public accountants for the Fund, will
be given access to the books and records of the
foreign banking institution relating to its actions
under its agreement with the Custodian; and (e)
assets of the Fund held by the foreign sub-
custodian will be subject only to the instructions
of the Custodian or its agents.
3.5 Access of Independent Accountants of the Fund. Upon
request of the Fund, the Custodian will use its
best efforts to arrange for the independent
accountants of the Fund to be afforded access to
the books and records of any foreign banking
institution employed as a foreign sub-custodian
31
insofar as such books and records relate to the
performance of such foreign banking institutions
under its agreement with the Custodian.
3.6 Reports by Custodian. The Custodian will supply to
the Fund from time to time, as mutually agreed
upon, statements in respect of the securities and
other assets of the Fund held by foreign sub-
custodians, including but not limited to an
identification of entities having possession of the
Fund's securities and other assets and advices or
notifications of any transfers of securities to or
from each custodial account maintained by a foreign
banking institution for the Custodian on behalf of
the Fund indicating, as to securities acquired for
the Fund, the identity of the entity having
physical possession of such securities.
3.7 Transactions in Foreign Custody Account. (a) Except
as otherwise provided in paragraph (b) of this
Section 3.7, the provision of Sections 2.2 and 2.7
of this Contract shall apply, mutatis mutandis to
the foreign securities of the Fund held outside the
United States by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract
to the contrary, settlement and payment for
securities received for the account of the Fund and
32
delivery of securities maintained for the account
of the Fund may be effected in accordance with the
customary or established securities trading or
securities processing practices and procedures in
the Jurisdiction or market in which the transaction
occurs, including, without limitation, delivering
securities to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer)
against a receipt with the expectation of receiving
later payment for such securities from such
purchaser or dealer.
(c) Securities maintained in the custody of a
foreign sub-custodian may be maintained in the name
of such entity's; nominee to the same extent as set
forth in Section 2.3 of this Contract and the Fund
agrees to hold any such nominee harmless from any
liability as a holder of record of such securities.
3.8 Liability of Foreign Sub-Custodians. Each
agreement pursuant to which the Custodian employs a
foreign banking institution as a foreign sub-
custodian shall require the institution to exercise
reasonable care in the performance of its duties
and to indemnify, and hold harmless, the Custodian
and each Fund from and against any loss, damage,
cost, expense, liability or claim arising out of or
33
in connection with the institution's performance of
such obligations. At the election of the Fund, it
shall be entitled to be subrogated to the rights
of the Custodian with respect to any claims against
a foreign banking institution as a consequence of
any such loss, damage, cost, expense, liability or
claim if and to the extent that the Fund has not
been made whole for any such loss, damage, cost,
expense, liability or claim.
3.9 Liability of Custodian. The Custodian shall be
liable for the acts or omissions of a foreign
banking institution to the same extent as set forth
with respect to sub-custodians generally in this
Contract and, regardless of whether assets are
maintained in the custody of a foreign banking
institution, a foreign securities depository or a
branch of a U.S. bank as contemplated by paragraph
3.12 hereof, the Custodian shall not be liable for
any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism
or any loss where the sub-custodian has otherwise
exercised reasonable care. Notwithstanding the
foregoing provisions of this paragraph 3.9, in
delegating custody duties to State Street London
34
Ltd., the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such
delegation, except such loss as may result from (a)
political risk (including, but not limited to,
exchange control restrictions, confiscation,
expropriation, nationalization, insurrection, civil
strife or armed hostilities) or (b) other losses
(excluding a bankruptcy or insolvency of State
Street London Ltd. not caused by political risk)
due to Acts of God, nuclear incident or other
losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable
care.
3.10 Reimbursement for Advances. If the Fund requires
the Custodian to advance cash or securities for any
purpose including the purchase or sale of foreign
exchange or of contracts for foreign exchange, 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, any property at any time held
for the account of the Fund shall be security
35
therefor and should the Fund fail to repay the
Custodian promptly, the Custodian shall be entitled
to utilize available cash and to dispose of the
Fund assets to the extent necessary to obtain
reimbursement.
3.11 Monitoring Responsibilities. The Custodian shall
furnish annually to the Fund, during the month of
June, information concerning the foreign sub-
custodians employed by the Custodian. Such
information shall be similar in kind and scope to
that furnished to the Fund in connection with the
initial approval of this Contract. In addition, the
Custodian will promptly inform the Fund in the
event that the Custodian learns of a material
adverse change in the financial condition of a
foreign sub-custodian or is notified by a foreign
banking institution employed as a foreign sub-
custodian that there appears to be a substantial
likelihood that its shareholders' equity will
decline below $200 million (U.S. dollars or the
equivalent thereof) or that its shareholders'
equity has declined below $200 million (in each
case computed in accordance with generally accepted
U.S. accounting principles).
36
3.12 Branches of U.S. Banks. (a) Except as otherwise set
forth in this Contract, the provision hereof shall
not apply where the custody of the Fund assets
maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section
2(a)(5) of the Investment Company Act of 1940 which
meets the qualification set forth in Section 26(a)
of said Act. The appointment of any such branch as
a sub-custodian shall be governed by Article 1 of
this Contract.
(b) Cash held for the Fund in the United Kingdom
shall be maintained in an interest bearing account
established for the Fund with the Custodian's
London branch, which account shall be subject to
the direction of the Custodian, State Street London
Ltd. or both.
3.13 Tax Law The Custodian shall have no responsibility
or liability for any obligations now or hereafter
imposed on the Fund or the Custodian as custodian
of the Fund by the tax law of the United States of
America or any state or political subdivision
thereof. It shall be the responsibility of the Fund
to notify the Custodian of the obligations imposed
on the Fund or the Custodian as custodian of the
Fund by the tax law of jurisdictions other than
37
those mentioned in the above sentence, including
responsibility for withholding and other taxes,
assessments or other governmental charges,
certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such
tax law shall be to use reasonable efforts to
assist the Fund with respect to any claim for
exemption or refund under the tax law of
jurisdictions for which the Fund has provided such
information.
4. Payments for Repurchases or Redemptions and Sales
of Shares of the Fund
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 of the
Fund, 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 of the Fund, the Custodian
shall honor checks drawn on the Custodian by a holder of Shares,
38
which checks have been furnished by the Fund to the holder of
Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to
time between the Fund and the Custodian.
The Custodian shall receive from the distributor for the
Fund's Shares or from the Transfer Agent of the Fund and deposit
into the Fund's account such payments as are received for Shares
of the Fund leased or sold from time to time by the Fund. The
Custodian will provide timely notification to the Fund and the
Transfer Agent of any receipt by it of payments for Shares of the
Fund.
5. Proper Instructions
Proper Instructions as used herein means a writing
signed or initialed by one or more person or 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. Oral instructions
will be considered Proper Instructions if the Custodian
reasonably believes them to have been given by a person
authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions
to be confirmed in writing. Upon receipt of a certificate of the
Secretary or an Assistant Secretary as to the authorization by
the Board of Directors of the Fund accompanied by a detailed
39
description of procedures approved by the Board of Directors,
Proper Instructions may include communications effected directly
between electro-mechanical or electronic device provided that the
Board of Directors and the Custodian are satisfied that such
procedures afford adequate safeguards for the Fund's assets. For
purposes of this Section, Proper Instructions shall include
instructions received by the Custodian pursuant to any three-
party agreement which requires a segregated asset account in
accordance with Section 2.11.
6. Action Permitted without Express Authority
The Custodian may in its discretion, without express
authority from the Fund:
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 payment
shall be accounted for to the Fund;
2) surrender securities in temporary form for
securities in definitive form;
3) endorse for collection, in the name of the Fund,
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 Fund except as otherwise directed by the Board of Directors
of the Fund.
40
7. 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 the Fund. 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.
8. 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 the Fund
and/or compute the net asset value per share of the outstanding
shares of the Fund or, if directed in writing to do so by the
Fund, 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 Fund as described in
the Fund's currently effective prospectus and shall advise the
Fund and the Transfer Agent daily of the total amounts of such
net income and, if instructed in writing by an officer of the
41
Fund to do so, shall advise the Transfer Agent periodically of
the division of such net income among its various components. The
calculations of the net asset value per share and the daily
income of the Fund shall be made at the time or times described
from time to time in the Fund's currently effective prospectus.
9. Records
The Custodian shall create and maintain all records
relating to its activities and obligations under this Contract in
such manner as will meet the obligations of the Fund under the
Investment Company, Act of 1940, with particular attention to
Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or
administrative rules or procedures which may be applicable to the
Fund. All such records shall be the property of the Fund and
shall at all times during the regular business hours of the
Custodian be open for inspection by duly authorized officers,
employees or agents of the Fund and employees and agents of the
Securities and Exchange Commission. The Custodian shall, at the
Fund's request, supply the Fund with a tabulation of securities
owned by the Fund and held by the Custodian and shall, when
requested to do so by the Fund and for such compensation as shall
be agreed upon between the Fund and the Custodian, include
certificate numbers in such tabulations.
42
10. 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-1A, and Form N-SAR or other
annual reports to the Securities and Exchange Commission and with
respect to any other requirements of such Commission.
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 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. 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 for any action taken or omitted by it in good faith
without negligence. It shall be entitled to rely on and may act
43
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. Notwithstanding the
foregoing, the responsibility of the Custodian with respect to
redemptions effected by check shall be in accordance with a
separate Agreement entered into between the Custodian and the
Fund.
The Custodian shall be liable for the acta or omissions
of a foreign banking institution appointed pursuant to the
provisions of Article 3 to the same extent as set forth in
Article 1 hereof with respect to sub-custodians located in the
United States (except as specifically provided in Article 3.9)
and, regardless of whether assets are maintained in the custody
of a foreign banking institution, a foreign securities depository
or a branch of a U.S. bank as contemplated by paragraph 3.12
hereof, the Custodian shall not be liable for any loss, damage,
coat, expense, liability or claim resulting from, or caused by,
the direction of or authorization by the Fund to maintain custody
or any securities or cash of the Fund in a foreign country
including, but not limited to, losses-resulting from
nationalization, expropriation, currency restrictions, or acts of
war or terrorism.
If the Fund requires the Custodian, its affiliates,
subsidiaries or agents, to advance cash or securities for any
purpose (including but not limited to securities settlements,
44
foreign exchange contracts and assumed settlement) 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, any
property at any time held for the account of the Fund shall be
security therefor and should the Fund fail to repay the Custodian
promptly, the Custodian shall be entitled to utilize available
cash and to dispose of the Fund assets to the extent necessary to
obtain reimbursement.
13. 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 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 and the receipt of an
annual certificate of the Secretary or an Assistant Secretary
45
that the Board of Directors has reviewed the use by the Fund of
such Securities System, as required in each case by Rule 17f-4
under the Investment Company Act of 1940, as amended and that the
Custodian shall not act under Section 2.10A 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 and the receipt of an
annual certificate of-the Secretary or an Assistant Secretary
that the Board of Directors has reviewed the use by the Fund of
the Direct Paper System; 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.
46
14. Successor Custodian
If a successor custodian 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 then held by it hereunder and shall transfer to an
account of the successor custodian all of the Fund's securities
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 Investment Company
Act of 1940, 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 and all instruments held by the Custodian relative
thereto and all other property held by it under this Contract and
47
to transfer to an account of such successor custodian all of the
Fund's securities held in any Securities System. Thereafter, such
bank or trust company shall be the successor of the Custodian
under this Contract.
In the event that securities, funds and other properties
remain in the possession of the Custodian after the date of
termination hereof owing to failure of the Fund to procure the
certified 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.
15. 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
48
additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Contract.
16. 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.
17. 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 Fund's assets.
18. 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 Fund's name, address,
and share position to requesting companies whose securities the
Fund owns. If the Fund tells the Custodian "no", the Custodian
will not provide this information to requesting companies. If the
Fund tells the Custodian "yes" or does not check either "yes.' or
"no" below, the Custodian is required by the rule to treat the
Fund as consenting to disclosure of this information for all
49
securities owned by the Fund or any funds or accounts established
by the Fund. For the Fund's protection, the Rule prohibits the
requesting company from using the Fund's name and address for any
purpose other than corporate communications. Please indicate
below whether the Fund consents or objects by checking one of the
alternatives below.
YES [ ] The Custodian is authorized to release the
Fund's name, address, and share positions.
NO [ X] The Custodian is not authorized to release the
Fund's name, address, and share positions.
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 28th day of September, 1997
ATTEST ALLIANCE UTILITY INCOME FUND, INC.
/s/ Xxxxxxxxx Xxxxx /s/ Xxxxx X. Xxxxxxx
____________________ By_____________________________
Assistant Secretary Chairman and President
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ /s/ Xxxxxx X. Xxxxx
____________________ By_____________________________
Assistant Secretary Executive Vice President
50
00250156.AQ0
